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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal period ended September 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from__________________ to ___________________
Commission file number 0-8927
NEVADA GOLD & CASINOS, INC.
(Name of small business issuer in its charter)
Nevada 88-0142032
(State or other jurisdiction of IRS Employer Identification No.)
Incorporation or organization)
3040 Post Oak Blvd.
Suite 675 Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 621-2245
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.12 Per Share
---------------------------------------
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
The number of common shares outstanding was 10,459,157 as of October
25, 2000.
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TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS....................................3
BALANCE SHEETS AS OF SEPTEMBER 30, 2000 AND
MARCH 31, 2000......................................................3
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999.........................................4
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 ......................................5
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999.........................................6
NOTES TO UNAUDITED FINANCIAL STATEMENTS..............................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ..................................................18
ITEM 2. CHANGES IN SECURITIES...............................................18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ...................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................18
ITEM 5. OTHER INFORMATION...................................................19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.....................................19
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PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Nevada Gold & Casinos, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
------------------ ----------------
ASSETS (Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 185,096 $ 1,489,735
Other assets 119,620 174,401
------------------ ----------------
OTAL CURRENT ASSETS 304,716 1,664,136
------------------ ----------------
Isle of Capri Black Hawk, L.L.C. 5,257,845 2,299,076
Gold Mountain Development, L.L.C. 2,110,349 2,025,423
Goldfield Resources, Inc. 480,812 480,812
Sunrise Land and Minerals, Inc. 371,750 371,750
Blue Diamond Resorts, Inc. 2,030,459 185,650
Note receivable from affiliate 1,421,766 1,995,013
Note receivable - other 848,887 1,032,161
Deferred loan issue costs 251,592 -
Deferred Federal Income Tax asset 1,484,593 -
Furniture, fixtures, and equipment, net of accumulated depreciation of
$162,809 and $144,202 at September 30 and March 31, 2000, respectively 93,329 85,149
------------------ ----------------
TOTAL ASSETS $ 14,656,098 $ 10,139,170
================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 101,003 $ 30,999
Accrued interest payable 89,090 21,157
Short term notes payable 1,715,000 1,817,999
Current portion of long term debt 36,993 47,378
------------------ ----------------
TOTAL CURRENT LIABILITIES 1,942,086 1,917,533
------------------ ----------------
LONG TERM DEBT
Mortgages payable, net of current portion 14,091 17,258
Notes payable, net of current portion 6,840,110 4,449,334
------------------ ----------------
TOTAL LONG TERM DEBT 6,854,201 4,466,592
------------------ ----------------
TOTAL LIABILITIES 8,796,287 6,384,125
------------------ ----------------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares authorized, 0 and 141,490 shares
outstanding at September 30 and March 31, 2000, respectively - 1,414,900
Common stock, $0.12 par value, 20,000,000 shares authorized, 10,402,323 and
10,341,040 shares outstanding at September 30 and March 31, 2000, respectively
1,248,279 1,240,924
Additional paid in capital 9,363,858 9,599,940
Accumulated deficit (4,752,326) (8,500,719)
------------------ ----------------
TOTAL STOCKHOLDERS' EQUITY 5,859,811 3,755,045
------------------ ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,656,098 $ 10,139,170
================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------------------
2000 1999
------------ -------------
<S> <C> <C>
REVENUES
Royalty income $ 9,000 $ 8,000
Interest income 70,188 56,868
Other income 37,679 11,065
------------ -------------
TOTAL REVENUES 116,867 75,933
------------ -------------
EXPENSES
General and administrative 85,878 81,984
Interest expense 154,166 72,077
Salaries 139,987 84,109
Legal and professional fees 96,510 105,957
Other 14,355 18,859
------------ -------------
TOTAL EXPENSES 490,896 362,986
------------ -------------
EQUITY IN EARNINGS OF ISLE OF CAPRI BLACK HAWK 1,555,139 -
EQUITY IN EARNINGS OF RCI 28,673 18,576
------------ -------------
Net Income (loss) before Federal Income tax (provision) benefit 1,209,783 (268,477)
Federal Income tax provision 318,593 -
------------ --------------
NET INCOME (LOSS) $ 891,190 $ (268,477)
============ ==============
PER SHARE INFORMATION
Net income (loss) $ 891,190 $ (268,477)
Preferred stock dividends accumulated - (42,796)
------------ -------------
Net income (loss) per common share $ 891,190 $ (311,273)
============ ==============
Weighted average number of common shares Outstanding 10,400,530 9,935,592
============ =============
Net income (loss) per common share, basic and diluted $ 0.09 $ (0.03)
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
------------------------------------------
2000 1999
------------ -------------
<S> <C> <C>
REVENUES
Royalty income $ 18,000 $ 14,000
Interest income 173,004 109,394
Other income 59,576 21,065
------------ -------------
TOTAL REVENUES 250,580 144,459
------------ -------------
EXPENSES
General and administrative 152,030 150,402
Interest expense 354,436 146,478
Salaries 258,982 169,340
Legal and professional fees 176,627 165,702
Other 25,881 27,905
------------ -------------
TOTAL EXPENSES 967,956 659,827
------------ -------------
EQUITY IN EARNINGS OF ISLE OF CAPRI BLACK HAWK 2,958,769 -
EQUITY IN EARNINGS (LOSS) OF RCI 22,407 (17,761)
------------ -------------
Net Income (loss) before Federal Income tax (provision)
benefit 2,263,800 (533,129)
Federal Income tax (provision) benefit 1,484,593 -
------------ -------------
NET INCOME (LOSS) $ 3,748,393 $ (533,129)
============ =============
PER SHARE INFORMATION
Net income (loss) $ 3,748,393 $ (533,129)
Preferred stock dividends accumulated - (85,243)
------------ -------------
Net income (loss) per common share $ 3,748,393 $ (618,372)
============ =============
Weighted average number of common shares Outstanding 10,385,179 9,905,960
============ =============
Net income (loss) per common share, basic and diluted $ 0.36 $ (0.06)
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
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NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-----------------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,748,393 $ (533,129)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation 18,607 16,703
Equity in earnings of Isle of Capri Black Hawk (2,958,769) -
Equity in earnings (loss) of RCI (22,407) 17,761
Consultant and investment banker option expense 1,763 44,796
Deferred Federal Income tax asset (1,484,593) -
Changes in operating assets and liabilities:
Other (230,613) (11,125)
Accounts payable and accrued liabilities 137,936 129,149
----------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (789,683) (335,845)
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and assets held for development (1,942,568) (10,903)
Purchase of furniture, fixtures, and equipment (7,312) (390)
Note receivable - other 183,274 -
Note receivable from an affiliate (1,124,730) (105,603)
----------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (2,891,336) (116,896)
----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 2,386,590 169,000
Common stock issued for cash, net of offering costs 121,630 287,873
Payments on debt (131,840) (111,769)
----------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,376,380 345,104
----------------- ---------------
Net increase (decrease) in cash (1,304,639) (107,637)
Beginning cash balance 1,489,735 161,234
----------------- ---------------
Ending cash balance $ 185,096 $ 53,597
================= ===============
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 218,058 $ 90,897
----------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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NOTE 1. BUSINESS
Nevada Gold & Casinos, Inc., which currently trades on the Boston Stock
Exchange under the ticker symbol "UWN" and Over-the-Counter Bulletin Board under
the ticker symbol "UWIN" (referred to herein as "UWIN"), has since 1993
developed its business in the areas of gaming, real estate development, and
restaurant franchise operations. Prior to March 31, 2000 UWIN was in the
development stage.
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 in to 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 Isle 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%.
The $29 million luxury 237-room hotel addition built on top of the
Casino and parking garage was completed in August 2000.
In addition, UWIN and/or 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 insufficient for its cash needs and it has historically relied
upon equity and debt financing to fund operations. Management will continue to
rely on external financing coupled with any cash distributions from IC-BH to
fund its working capital needs. In the event such capital resources are not
available to UWIN, operations may be curtailed.
UWIN and its venture partner, Isle, developed the Casino, which
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 regulation. 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 hotel on top
of the Casino.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been prepared by UWIN,
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission, and reflect all adjustments which are, in the opinion of
management, necessary to present a fair statement of the results for the interim
periods on a basis consistent with the annual audited consolidated financial
statements. All such adjustments are of a normal recurring nature. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for an entire year. Certain information, accounting
policies and footnote disclosures normally included in financial statements
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prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that all disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with UWIN's
audited consolidated financial statements included in UWIN's Annual Report on
Form 10-KSB for the year ended March 31, 2000.
CASH AND CASH EQUIVALENTS - Interest-bearing deposits and other
investments, with original maturities of three months or less from the date of
purchase, are considered cash and cash equivalents.
MINING PROPERTIES AND CLAIMS - Historically, UWIN capitalized 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 September 30, 2000, and March 31, 2000,
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. - Real estate held for development
consists of undeveloped land located in and around Black Hawk, Colorado, Nevada
County, California, and Wellesley Island, New York. 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 June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities that require an entity to
recognize all derivatives as an asset or liability measured at fair value.
Depending on the intended use of the derivative, changes in its fair value will
be reported in the period of change as either a component of earnings or a
component of other comprehensive income.
In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133". SFAS No. 137 delays the effective date for
implementation of SFAS No. 133 for one year making SFAS No. 133 effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Retroactive
application to periods prior to adoption is not allowed. UWIN has not quantified
the impact, if any, of adoption on its financial statements or the date it
intends to adopt. Earlier application of SFAS No. 133 is encouraged, but not
prior to the beginning of any fiscal quarter that begins after issuance of SFAS
No. 137.
FURNITURE, FIXTURES, AND EQUIPMENT - UWIN depreciates furniture,
fixtures, and equipment over their estimated useful lives, ranging from two to
seven years, using the straight-line method.
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Expenditures for furniture, fixtures, and equipment are capitalized at cost.
When items are retired or otherwise disposed of, a gain or (loss) is recorded
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.
INCOME TAXES - UWIN accounts for income taxes under the provisions of
SFAS No. 109 - "Accounting for Income Taxes," which provides for an asset and
liability approach for accounting for income taxes. Under this approach,
deferred tax assets and liabilities are recognized based on anticipated future
tax consequences, using currently enacted tax laws, attributable to differences
between financial statement carrying amounts of assets and liabilities and their
respective tax basis.
INCOME (LOSS) PER SHARE DATA - Basic earnings per common share amounts
are calculated using the average number of common shares outstanding during each
period. Diluted earnings per share assumes the exercise of all stock options
having exercise prices less than the average market price of the common stock
using the "treasury stock method" and for convertible debt securities using the
"if converted method".
STOCK-BASED COMPENSATION - UWIN has adopted SFAS No. 123 - "Accounting
for Stock Based Compensation". Under SFAS No. 123, UWIN is permitted to either
record expenses for stock options and other employee compensation plans based on
their fair value at the date of grant or to continue to apply its current
accounting policy under Accounting Principles Board, ("APB") No. 25 "Accounting
for Stock Issued to Employees", and recognize compensation expense, if any,
based on the intrinsic value of the equity instrument at the measurement date.
UWIN elected to continue following APB No. 25.
BASIS OF PRESENTATION - These financial statements are consolidated for
all wholly owned subsidiaries as of September 30 and March 31, 2000. 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. Prior to March 31, 2000 UWIN was in the development
stage.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CONCENTRATION OF RISK - UWIN does not currently have gaming operations
other than the IC-BH Casino and is dependent to a large extent upon IC-BH for
its revenues. Accordingly, UWIN will be subject to greater risks than a
geographically diversified gaming operation, including, but not limited to,
risks related to local economic and competitive conditions, complications caused
by weather or road closure, road construction on primary access routes, changes
in local and state governmental laws and regulations (including changes in laws
and regulations affecting gaming operations and taxes) and natural and other
disasters.
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Any decline in the number of residents or visitors to the Black Hawk
Market, a downturn in the overall economy of the area served by the Black Hawk
Market, a decrease in gaming activities in the Black Hawk Market or an increase
in competition could have a material adverse effect on UWIN.
NOTE 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, the hotel opened on July 23, 2000. 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 is financed by $75 million in 13% First Mortgage Notes due
2004. The hotel on top of the Casino is financed by the Casino's cash flows
through September 30, 2000 in the amount of $18,745,000, $5,000,000 from a loan
from Isle, and $750,000 from a payment in kind loan from Isle.
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.
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 period ended September 30, 2000, IC-BH's undistributed earnings
allocable to UWIN through October 31, 2000 totaled $1,555,139. UWIN's basis in
the project through October 31, 2000 is $5,257,845.
The following is a summary of condensed financial information
pertaining to the IC-BH as of its fiscal quarter ended October 31, 2000:
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ISLE OF CAPRI BLACK HAWK, L.L.C.
CONDENSED BALANCE SHEET
AS OF OCTOBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
(In thousands)
2000 1999
-------- --------
<S> <C> <C>
Current assets $ 12,330 $ 15,999
Property and equipment (net) 104,723 84,161
Other assets 3,285 4,458
-------- --------
Total assets $120,338 $104,618
======== ========
Current liabilities $ 22,065 $ 18,704
Long-term debt 75,000 75,359
Members' equity 23,273 10,555
-------- --------
Total liabilities and members' equity $120,338 $104,618
======== ========
</TABLE>
ISLE OF CAPRI BLACK HAWK, L.L.C.
CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
(In thousands)
Revenue: 2000 1999
-------- --------
<S> <C> <C>
Casino 51,043 39,685
Rooms 1,194 0
Food, beverage, and other 6,970 5,305
-------- --------
Total revenue 59,207 44,990
Operating expenses:
Casino 3,361 2,588
Gaming taxes 10,060 7,803
Rooms 647 0
Food, beverage, and other 5,061 4,282
Other operating expense 26,381 21,217
-------- --------
Total operating expenses 45,510 35,890
Earnings from Operations 13,697 9,100
-------- --------
Interest expense, net (5,443) (5,341)
Depreciation (1,375) (990)
-------- --------
Net income $ 6,879 $ 2,769
======== ========
</TABLE>
Differences in UWIN's carrying value of its investment in IC-BH and its equity
interest in IC-BH are primarily due to the fact that UWIN originally contributed
appreciated property which was initially recorded by IC-BH at its fair market
value while UWIN continued to carry the property at its original cost basis.
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NOTE 4. REAL ESTATE AND ASSETS HELD FOR DEVELOPMENT
UWIN, through its wholly owned subsidiary, Gold Mountain Development,
L.L.C. ("GMD"), owns approximately 240 acres of real property in the vicinity of
Black Hawk, Colorado.
The casinos currently operating in Black Hawk employ in excess of 6,000
individuals. Because only limited residential housing is available in Black
Hawk, these employees generally commute daily for distances of 25 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 is currently evaluating the feasibility of developing a
master-planned residential and commercial project on the property, and to obtain
investors and/or joint venture partners for it and UWIN in order to finance the
project. Sales of pad sites may be made to assist in the funding of the project.
As of the date hereof, no joint venture projects or sales have been consummated.
In April 2000 UWIN's wholly owned subsidiary, Blue Diamond Resorts,
Inc., purchased approximately 890 acres on Wellesley Island in New York State
for a purchase price of $1,802,000. Wellesley Island is one of New York's "1000
Islands" that lie in the St. Lawrence Seaway between the borders of the United
States and Canada. The eight-mile long island has for many years capitalized on
increased domestic and international traffic that frequents this historic
tourist destination. UWIN is conducting a feasibility study of the real estate
for development of a master-planned resort community, which covers roughly 10
percent of the island. The potential exists for an Indian-based casino in the
area, the successful accomplishment of which cannot be accurately predicted due
to numerous requirements for local, state and governmental approvals.
Sunrise Land and Minerals Corporation ("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.
NOTE 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
franchise in Sao Paulo, Brazil, giving RCI ownership and operation of 18 Pizza
Hut restaurants and one KFC restaurant in Sao Paulo. Subsequently the KFC
restaurant was converted into a Pizza Hut restaurant. The President and Chairman
of RCI is James Wong, who was elected a Director of UWIN in March 1999.
UWIN's ownership of RCI is being accounted for using the equity method
of accounting. UWIN's investment in RCI is stated at cost, adjusted for its
equity in the undistributed earnings or losses of RCI. During UWIN's period
ended September 30, 2000, RCI's undistributed losses allocable to UWIN from
inception through June 30, 2000 totaled $755,020. In accordance with the
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equity method of accounting, UWIN's investment account balance was reduced to
zero and the remaining allocated loss of $732,620 is not reflected in the
financial statements.
NOTE 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 acres, to Goldfield in exchange for shares
of common stock of Goldfield. Goldfield is not directly involved in mining
operations. In August 1998, Goldfield secured a mining lease for its properties
with Romarco Nevada, Inc., and retains a royalty interest 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.
NOTE 7. FEDERAL INCOME TAXES
UWIN has available net operating loss carryforwards ("NOL's") amounting
to $6,771,133. A valuation allowance was previously recorded equal to the net
deferred tax asset. Management of UWIN believed sufficient uncertainty existed
regarding the realizability of these NOL's resulting from UWIN's history of
operating losses, it's ability to generate taxable income within the net
operating loss carryforward period and limitations imposed as a result of a
change in it's ownership occurring in 1994. No income tax expense or benefit was
recorded for the year ended March 31, 2000.
Although UWIN has a history of prior losses, those losses were
primarily accumulated during its development stage. Based upon further analysis
of the limitations and expirations of the NOL's and current earnings and future
income projections of IC-BH, management of UWIN believes that it is more likely
than not that the benefits of the NOL's will be realized. As a result, the
valuation allowance was reduced and a net deferred tax asset of $1,803,186 and
federal income tax benefit of $1,803,186 were recorded for the three month
period ended June 30, 2000.
During the three month period ended September 30, 2000, UWIN recorded a
deferred tax expense in the amount of $318,593 reducing the net deferred tax
asset to $1,484,593.
NOTE 8. 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) real estate
development, (iii) restaurant franchise, and (iv) mining properties and claims.
The gaming segment involves the operation of a casino entertainment complex in
Black Hawk, Colorado. The real estate segment involves the development of
master-planned residential and commercial property project adjacent to Black
Hawk, Colorado and another at Wellesley Island, New York. The restaurant
franchise segment involves an ownership interest in Pizza Hut franchises in Sao
Paulo, Brazil. The mining property and claims segment
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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 other miscellaneous profit
(loss) income and expense not allocated to reportable segments.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------
Real Restaurant
Gaming Estate Franchises Mining Other Totals
-------------- -------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ - $ - $ - $ 18,000 $ 59,576 $ 77,576
Segment profit (loss) (217,013) (297,247) - (43,793) (158,140) (716,193)
Segment assets 5,257,845 4,512,558 - 480,812 - 10,251,215
Interest expense - 77,913 - 1,063 275,460 354,436
Interest income - - - - 173,004 173,004
Equity in earnings (loss)
of equity investment 2,958,769 - 22,407 - 2,981,176
SIX MONTHS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------------------------------
Real Restaurant
Gaming Estate Franchises Mining Other Totals
-------------- ------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ - $ - $ - $ 14,000 $ 21,065 $ 35,065
Segment profit (loss) (20,062) (20,062) - (4,012) (36,113) (80,249)
Segment assets - 2,395,648 - 480,812 - 2,876,460
Interest expense - 106,021 - 367 40,090 146,478
Interest income - - - - 109,394 109,394
Equity in earnings (loss)
of equity investment - - 17,761 - - 17,761
</TABLE>
Reconciliation of reportable segment assets to UWIN's consolidated totals are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------
2000 1999
------------- -----------
<S> <C> <C>
Assets
Total assets for reportable segments $10,251,215 $ 2,876,460
Cash not allocated to segments 185,096 53,597
Furniture, fixtures, & equipment not allocated to segments
93,329 77,523
Other assets not allocated to segments 4,126,458 1,642,431
----------- -----------
Total assets $14,656,098 $ 4,650,011
=========== ===========
</TABLE>
14
<PAGE> 15
Reconciliation of reportable segment revenues to UWIN's consolidated totals is
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------
2000 1999
---------- ---------
<S> <C> <C>
Revenue
Total revenue for reportable segments $ 77,576 $ 35,065
Interest income not allocated to reportable segments 173,004 109,394
---------- ---------
Total revenue $ 250,580 $ 144,459
========== =========
</TABLE>
ITEM 2. 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-QSB. 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 its operations.
General
UWIN is primarily engaged in gaming, real estate development, and
restaurant franchise operations. UWIN reported net income of $891,190 for the
three months ended September 30, 2000 compared to a net loss of $268,477 for the
three months September 30, 1999.
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 period ended September 30, 2000, IC-BH's income allocable
to UWIN through October 31, 2000, IC-BH's quarter end, totaled $1,555,139.
UWIN's basis in the project through October 31, 2000 is $ 5,257,845. The hotel
located on top of the Casino and parking garage opened this past quarter. It is
expected that this will enhance operation of IC-BH in the coming year.
Property held for development consists of undeveloped acreage and
improvements located in and around Black Hawk, Colorado, Wellesley Island, New
York, 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.
At June 30,2000, UWIN recorded a net deferred tax asset in the amount
of $1,803,186. As a result of UWIN's net income for the three months ending
September 30, 2000, a deferred tax expense was recorded in the amount of
$318,593, reducing the net deferred tax asset to $1,484,593. UWIN expects the
net deferred tax asset to be further reduced as it is utilized to offset
anticipated taxable income.
15
<PAGE> 16
Results of Operations
Comparison of three months ended September 30, 2000 and 1999
REVENUES. Revenues increased $40,934, to $116,867 for the three
months ended September 30, 2000, compared to $75,933 for the three months ended
September 30, 1999. The increase in current revenues is attributable to monthly
lease payments from the Romarco Nevada, Inc., lease with Goldfield Resources,
Inc., interest income on loans and proceeds from a claim settlement.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased $3,894 to $85,878 for the three months ended September 30,
2000, as compared to the same period in the prior year. The increase is
attributable to travel expenses.
INTEREST EXPENSE. Interest expense increased $82,089, to $154,166 for
the three months ended September 30, 2000, compared to the three months ended
September 30, 1999. The increase is due to an increase in long-term notes
resulting from a draw down from UWIN's credit facility for the three months
ending September 30, 2000.
SALARIES. Salaries increased $55,878, to $139,987 for the three months
ended September 30, 2000, compared to the three months ended September 30, 1999.
The increase is attributable to an expansion in staffing and salary increases
for existing staff.
LEGAL AND PROFESSIONAL FEES. Legal and professional fees decreased
$9,447, to $96,510 for the three months ended September 30, 2000, as compared to
the same period in the prior year. The decrease is due to a decrease in outside
legal services.
TOTAL EXPENSES. Total expenses increased $127,910, to $490,896 for the
three months ended September 30, 2000, compared to the three months ended
September 30, 1999. The increase was due primarily to an increase in interest
expense and salaries.
NET INCOME (LOSS). UWIN reported net income of $891,190 for the three
months ended September 30, 2000, as compared to a net loss of $268,477 for the
three month ended September 30, 1999. This increase is the result of UWIN
reporting equity in earnings from IC-BH in the amount of $1,555,139 for the
three months ended October 31, 2000.
Comparison of six months ending September 30, 2000 and
September 30, 1999
REVENUES. Revenues increased $106,121, to $250,580 for the six months
ended September 30, 2000, compared to $144,459 for the six months ended
September 30, 1999. The increase in current revenues is attributable to monthly
lease payments, interest income on loans and proceeds from a claim settlement.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased $1,628 to $152,030 for the six months ended September 30,
2000, as compared to the same period in
16
<PAGE> 17
the prior year. The increase is attributable to lease expense, depreciation
expense, and employee benefits.
INTEREST EXPENSE. Interest expense increased $207,958, to $354,436 for
the six months ended September 30, 2000, compared to the six months ended
September 30, 1999. The increase is due to an increase in long-term notes
payable resulting from a draw down from UWIN's credit facility for the six
months ended September 30, 2000.
SALARIES. Salaries increased $89,642, to $258,982 for the six months
ended September 30, 2000, compared to the six months ended September 30, 1999.
The increase is attributable to an expansion in staffing and salary increases
for existing staff.
LEGAL AND PROFESSIONAL FEES. Legal and professional fees increased
$10,925, to $176,627 for the six months ended September 30, 2000, as compared to
the same period in the prior year. The increase is due to increased outside
accounting services.
TOTAL EXPENSES. Total expenses increased $308,129, to $967,956 for the
six months ended September 30, 2000, compared to the six months ended September
30, 1999. The increase was due primarily to an increase in interest expense,
salaries expense, and professional fees.
NET INCOME (LOSS). UWIN reported net income of $3,748,393 for the six
months ended September 30, 2000, as compared to a net loss of $533,129 for the
six month ended September 30, 1999. This increase is the result of UWIN
reporting equity in earnings from IC-BH in the amount of $2,958,769 and
recognition of a deferred tax benefit of $1,803,186 based upon projected
earnings available to utilize NOL's prior to their expiration.
Liquidity and Capital Resources
OPERATING ACTIVITIES. Cash used in operating activities for the six
months ended September 30, 2000 amounted to $789,683, an increase of $453,838
over the $335,845 of cash used in operating activities for the six months ended
September 30, 1999.
INVESTING ACTIVITIES. Cash used in investing activities during the six
months ended September 30, 2000 amounted to $2,891,336, an increase of
$2,774,440 over the $116,896 of cash used in investing activities for the six
months ended September 30, 1999.
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 six months ended September 30, 2000 UWIN received
$121,630 from cash sales of its common stock, a decrease of $166,243 compared to
the $287,873 received from cash sales of common stock for the same period in the
previous year. During the six months ended September 30, 2000 UWIN received
proceeds of $2,386,590 from debt, an increase of $2,217,590, over the $169,000
received from proceeds of debt for the same period in the previous year. During
the six months ended September
17
<PAGE> 18
30, 2000, UWIN expended $131,840 for payments on outstanding debt, an increase
of $20,071, over the $111,769 expended for payments on outstanding debt for the
period ended September 30, 1999.
At September 30, 2000, UWIN had a cash balance of $185,096 and
short-term notes payable of $1,715,000. Of that amount, $1,600,000 was
originally scheduled to mature in August 2000, but was extended until August
2001.
UWIN entered into a $7 million credit facility in December 1999 and is
entitled to draw down available funds upon five days written notice, which
indebtedness will bear interest at 11% per annum, with principal maturing on
December 24, 2004. As of September 30, 2000, UWIN has drawn down a total of
$6,750,000, leaving $250,000 available for future borrowings.
Historically, UWIN has been successful in raising working
capital through the sale of debt and equity securities. UWIN intends to fund
long term liquidity needs through currently available resources, which may
include cash flow distributed from the Casino/hotel operations, and additional
sales of its debt or equity securities. UWIN has experienced and expects to
continue to experience substantial working capital requirements. UWIN believes
it will be able to generate capital resources and liquidity sufficient to fund
its capital expenditures and meet such financial obligations as they come due.
In the event such capital resources are not available to UWIN, certain portions
of its operating plan activities may be curtailed.
PART II
ITEM 1. LEGAL PROCEEDINGS
UWIN is not currently engaged in any material litigation that is not
routine or merely incidental to its business.
ITEM 2. CHANGES IN SECURITIES
The following stock issuances occurred between July 1, 2000 and
September 30, 2000. Each issuance was exempt from registration pursuant to
Section 4(2) and/or Regulation D under the Act as a transaction by an issuer not
involving any public offering. No underwriter was utilized in the offering and
no commissions were paid.
UWIN issued 3,000 shares of common stock to one investor for the
exercise of options in the amount of $6,180.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
18
<PAGE> 19
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS 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
(b) Reports on Form 8-K
None.
<PAGE> 20
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: November 13, 2000
<PAGE> 21
EXHIBIT INDEX
Exhibit
Number 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
