<PAGE> 1
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 June 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 10,402,657 as of August 7,
2000.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS........................................3
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2000 AND
MARCH 31, 2000.........................................................3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND 1999 ..............................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND 1999.................................................5
NOTES TO UNAUDITED FINANCIAL STATEMENTS..................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ......................................................16
ITEM 2. CHANGES IN SECURITIES...................................................16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.........................................16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................17
ITEM 5. OTHER INFORMATION.......................................................17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.........................................17
</TABLE>
2
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PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Nevada Gold & Casinos, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
------------ ------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 186,373 $ 1,489,735
Other assets 158,104 174,401
------------ ------------
TOTAL CURRENT ASSETS 344,477 1,664,136
------------ ------------
Isle of Capri Black Hawk, L.L.C 3,702,706 2,299,076
Gold Mountain Development, L.L.C 2,025,492 2,025,423
Goldfield Resources, Inc. 480,812 480,812
Sunrise Land and Minerals, Inc. 371,750 371,750
Blue Diamond Resorts, Inc. 1,887,514 185,650
Note receivable from affiliate 1,119,036 1,995,013
Note receivable - other 908,480 1,032,161
Deferred loan issue costs 225,818 --
Deferred Federal Income Tax asset 1,803,186 --
Furniture, fixtures, and equipment, net of accumulated depreciation of
$153,123 and $144,202 at June 30 and March 31, 2000, respectively 102,736 85,149
------------ ------------
TOTAL ASSETS $ 12,972,007 $ 10,139,170
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 284,868 $ 30,999
Accrued interest payable 58,423 21,157
Short term notes payable 1,759,868 1,817,999
Current portion of long term debt 45,284 47,378
------------ ------------
TOTAL CURRENT LIABILITIES 2,148,443 1,917,533
------------ ------------
LONG TERM DEBT
Mortgages payable, net of current portion 15,534 17,258
Notes payable, net of current portion 5,845,589 4,449,334
------------ ------------
TOTAL LONG TERM DEBT 5,861,123 4,466,592
------------ ------------
TOTAL LIABILITIES 8,009,566 6,384,125
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares authorized, 0 shares
outstanding at June 30 and 141,490 shares outstanding at March 31, 2000 -- 1,414,900
Common stock, $0.12 par value, 20,000,000 shares authorized, 10,399,323
and 10,341,040 shares outstanding at June 30 and March 31, 2000, respectively 1,247,919 1,240,924
Additional paid in capital 9,358,038 9,599,940
Accumulated deficit (5,643,516) (8,500,719)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,962,441 3,755,045
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,972,007 $ 10,139,170
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Royalty income $ 9,000 $ 6,000
Interest income 102,816 52,526
Other income 21,897 10,000
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TOTAL REVENUES 133,713 68,526
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EXPENSES
General and administrative 66,152 68,418
Interest expense 200,269 74,401
Salaries 118,994 85,231
Legal and professional fees 80,118 59,746
Other 11,527 9,046
------------ ------------
TOTAL EXPENSES 477,060 296,842
------------ ------------
EQUITY IN EARNINGS OF ISLE OF CAPRI BLACK HAWK 1,403,630 --
EQUITY IN EARNINGS (LOSS) OF RCI (6,266) (36,337)
------------ ------------
Net Income (Loss) before Federal Income tax
(provision) benefit 1,054,017 (264,653)
Federal Income tax (provision) benefit 1,803,186 --
------------ ------------
NET INCOME (LOSS) $ 2,857,203 $ (264,653)
============ ============
PER SHARE INFORMATION
Net income (loss) $ 2,857,203 $ (264,653)
Preferred stock dividends accumulated -- (42,447)
------------ ------------
Net income (loss) per common share $ 2,857,203 $ (307,100)
============ ============
Weighted average number of common shares
Outstanding 10,354,210 9,875,670
============ ============
Net income (loss) per common share, basic and
diluted $ .28 $ (.03)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,857,203 $ (264,653)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation 8,921 8,319
Equity in earnings of Isle of Capri Black Hawk (1,403,630) --
Equity in loss of RCI 6,266 36,337
Consultant and investment banker option expense 1,763 22,545
Deferred Federal Income tax asset (1,803,186)
Changes in operating assets and liabilities:
Other (272,766) (11,125)
Accounts payable and accrued liabilities 291,135 10,384
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (314,294) (198,193)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and assets held for development (1,713,997) 1,206
Purchase of furniture, fixtures, and equipment (7,033) (390)
Note receivable - other 123,681 --
Note receivable from an affiliates (822,000) (87,444)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (2,419,349) (86,628)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 1,386,590 39,000
Common stock issued for cash, net of offering costs 115,450 233,948
Payments on debt (71,759) (106,908)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,430,281 166,040
----------- -----------
Net increase (decrease) in cash (1,303,362) (118,781)
Beginning cash balance 1,489,735 161,234
----------- -----------
Ending cash balance $ 186,373 $ 42,453
=========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 145,340 $ 54,507
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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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%.
A $29 million 237-room hotel on top of the Casino commenced operations in
July 2000 and 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. UWIN anticipates its portion of available
cash flow from IC-BH will be sufficient to fund its needs. However, UWIN cannot
assure that its portion of the cash flow from the IC-BH will be sufficient to
fund its working capital requirements. In that event, management intends to
raise additional funds through the sale of debt and equity securities. 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
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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
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 June 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.
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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. 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 - UWIN has implemented SFAS No. 128 -
"Earnings per Share" which establishes the requirements for presenting earnings
per share ("EPS"). SFAS No. 128 requires the presentation of "basic" and
"diluted" EPS on the face of the income statement. 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 June 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
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governmental laws and regulations (including changes in laws and regulations
affecting gaming operations and taxes) and natural and other disasters.
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 $29 million hotel on top of the Casino is financed by (i) cash flows from
the Casino, (ii) a $5 million dollar loan from Isle, (iii) up to a $5 million
payment in kind loan, and (iv) equity contributions from the joint venture
partners for any difference. As of June 30, 2000, $15,574,000 has been funded
from the Casino's cash flows, $5,000,000 from the loan from Isle, and $750,000
from the $5 million payment in kind loan.
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 June 30, 2000, IC-BH's undistributed earnings allocable to UWIN
through July 30, 2000 totaled $1,403,630. UWIN's basis in the project through
July 30, 2000 is $3,702,706.
The following is a summary of condensed financial information pertaining to
the IC-BH as of its fiscal quarter ended July 30, 2000:
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Isle of Capri Black Hawk, L.L.C.
Condensed Balance Sheet
as of July 30, 2000
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Current assets $ 10,819
Property and equipment (net) 104,095
Other assets 3,458
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Total assets $118,372
========
Current liabilities $ 23,716
Long-term debt 75,000
Members' equity 19,656
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Total liabilities and members' equity $118,372
========
</TABLE>
Isle of Capri Black Hawk, L.L.C.
Condensed Income Statement
For the three months ended July 30, 2000
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Revenue:
Casino $ 24,458
Rooms 64
Food, beverage, and other 3,364
--------
Total revenue 27,886
Operating expenses:
Casino $ 1,684
Gaming taxes 4,803
Rooms 85
Food, beverage, and other 2,372
Other operating expense 12,763
--------
Total operating expenses 21,707
Earnings from Operations 6,179
--------
Interest expense, net (2,337)
Depreciation (574)
--------
Net income $ 3,268
========
</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 over 800 acres on Wellesley Island in New York State for a purchase
price of approximately $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 June
30, 2000, RCI's undistributed losses allocable to UWIN through March 31, 2000
totaled $665,054. In accordance with the equity method of
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accounting, UWIN's investment account balance was reduced to zero and the
remaining allocated loss of $642,654 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
$7,347,104. A valuation allowance was previously recorded equal to the net
deferred tax asset since 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 was recorded during the period ended June 30,
2000.
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) restaurant
franchises, (iii) mining properties and claims, and (iv) real estate
development. 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 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.
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<TABLE>
<CAPTION>
Real Restaurant
Gaming Estate Franchises Mining Other Totals
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ -- $ -- $ -- $ 9,000 $ 21,897 $ 30,897
Segment profit (loss) (101,626) (163,923) -- (19,583) (58,214) (343,347)
Segment assets 3,702,706 4,277,256 -- 480,812 -- 8,460,774
Interest expense -- 51,436 -- 375 148,458 200,269
Interest income -- -- -- -- 102,816 102,816
Equity in earnings (loss)
of equity investment 1,403,630 -- (6,266) -- -- 1,397,364
</TABLE>
<TABLE>
<CAPTION>
Real Restaurant
Gaming Estate Franchises Mining Other Totals
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ -- $ -- $ -- $ 6,000 $ 10,000 $ 16,000
Segment profit (loss) (57,079) (57,079) -- (11,416) (102,742) (228,316)
Segment assets -- 2,178,033 -- 480,812 -- 2,658,845
Interest expense -- 55,225 -- 200 18,976 74,401
Interest income -- -- -- -- 52,526 52,526
Equity in earnings (loss)
of equity investment -- -- (36,337) -- -- (36,337)
</TABLE>
Reconciliation of reportable segment assets to UWIN's consolidated totals are as
follows:
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
2000 1999
----------- ----------
<S> <C> <C>
Assets
Total assets for reportable segments $8,460,774 $2,658,845
Cash not allocated to segments 186,373 42,453
Notes receivable not allocated to segments -- 132,738
Furniture, fixtures, & equipment not allocated to
segments 102,736 85,907
Other assets not allocated to segments 4,222,124 1,534,286
----------- ----------
Total assets $12,972,007 $4,454,229
=========== ==========
</TABLE>
Reconciliation of reportable segment revenues to UWIN's consolidated totals are
as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Revenue
Total revenue for reportable segments $ 30,897 $ 16,000
Interest income not allocated to reportable segments 102,816 52,526
-------- --------
Total revenue $133,713 $ 68,526
======== ========
</TABLE>
13
<PAGE> 14
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 $2,857,203 for the
three months ended June 30, 2000 compared to a net loss of $264,653 for the
three months June 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 June 30, 2000, IC-BH's income allocable to UWIN
through July 31, 2000, IC-BH's quarter end, totaled $1,403,630. UWIN's basis in
the project through July 31, 2000 is $ 3,702,706.
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.
Results of Operations
Comparison of three months ended June 30, 2000 and 1999
REVENUES. Revenues increased $65,187, to $133,713 for the three months
ended June 30, 2000, compared to $68,526 for the three months ended June 30,
1999. The increase in current revenues is attributable to monthly lease payments
from the Remarco 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
decreased $2,266 to $66,152 for the three months ended June 30, 2000, as
compared to the same period in the prior year. The decrease is primarily
attributable to a reduction in travel and telephone expenses.
INTEREST EXPENSE. Interest expense increased $125,868, to $200,269 for the
three months ended June 30, 2000, compared to the three months ended June 30,
1999. The increase is due to an increase in long-term notes.
SALARIES. Salaries increased $33,763, to $118,994 for the three months
ended June 30, 2000, compared to the three months ended June 30, 1999. The
increase is primarily attributable to an expansion in staffing and salary
increases for existing staff.
14
<PAGE> 15
LEGAL AND PROFESSIONAL FEES. Legal and professional fees increased $20,372,
to $80,118 for the three months ended June 30, 2000, as compared to the same
period in the prior year. The increase is primarily due to an increase in
consulting services.
OTHER EXPENSES. Other expenses increased $2,481, to $11,527 for the three
months ended June 30, 2000, compared to the three months ended June 30, 1999.
The increase was due primarily to an increase in postage and insurance expense.
NET INCOME (LOSS). UWIN reported net income of $2,857,203 for the three
months ended June 30, 2000, as compared to a net loss of $264,653 for the three
month ended June 30, 1999. This increase is the result of UWIN reporting equity
in earnings from IC-BH in the amount of $1,403,630 during 2000 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 three
months ended June 30, 2000 amounted to $314,294, an increase of $116,101 over
the $198,193 of cash used in operating activities for the three months ended
June 30, 1999.
INVESTING ACTIVITIES. Cash used in investing activities during the three
months ended June 30, 2000 amounted to $2,419,349, an increase of $2,332,721
over the $86,628 of cash used in investing activities for the three months ended
June 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 three months ended June 30, 2000 UWIN received
$115,450 from cash sales of its common stock, a decrease of $118,498 compared to
the $233,948 received from cash sales of common stock for the same period in the
previous year. During the three months ended June 30, 2000 UWIN received
proceeds of $1,386,950 from debt, an increase of $1,347,590, over the $39,000
received from proceeds of debt for the same period in the previous year. During
the three months ended June 30, 2000, UWIN expended $71,759 for payments on
outstanding debt, a decrease of $35,149, over the $106,908 expended for payments
on outstanding debt for the period ended June 30, 1999.
During the quarter ended June 30, 2000 UWIN redeemed the 141,490 shares of
12% cumulative preferred stock issued to CCH and Aaminex Capital Corp. The
$1,414,900 carrying amount of the preferred shares, plus accrued but unpaid
dividends of $352,120 were satisfied in exchange for reductions of amounts due
from affiliates.
At June 30, 2000, UWIN had a cash balance of $186,374 and short-term notes
payable of $1,759,868 of which $1,600,000 matures in August 2000. UWIN is in the
process of extending the maturity dates.
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
15
<PAGE> 16
annum, with principal maturing on December 24, 2004. As of June 30, 2000, UWIN
has drawn down a total of $5,750,000, leaving $1,250,000 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 if required, additional sales
of its securities.
UWIN has experienced and expects to continue to experience substantial
working capital requirements. UWIN intends to fund its fiscal 2001 capital
expenditures, commitments and working capital requirements through cash flows
from operations, and to the extent necessary, other financing activities. 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 April 1 and June 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 783 shares of common stock to one accredited investor for
services, with those shares having an aggregate value of $1,763.
UWIN issued 7,500 shares of common stock to one investor for the exercise
of options in the amount of $15,450.
UWIN issued 50,000 shares of common stock to two investors for an aggregate
purchase price of $100,000.
UWIN redeemed the 141,490 shares of 12% cumulative preferred stock issued
to CCH and Aaminex Capital Corp. The $1,414,900 carrying amount of the preferred
shares, plus accrued but unpaid dividends of $352,120 were satisfied in exchange
for reductions of amounts due from affiliates.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
16
<PAGE> 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
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
*23.1 - Consent of Pannell Kerr Forster of Texas, P.C.
27 - Financial Data Schedule
----------
* Previously filed
(b) Reports on Form 8-K
None.
17
<PAGE> 18
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: August 14, 2000
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
*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
*23.1 - Consent of Pannell Kerr Forster of Texas, P.C.
27 - Financial Data Schedule
</TABLE>
----------
* Previously filed
