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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, 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
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. _____
The issuer's revenues for its fiscal year ending March 31, 2000:
$340,072
The aggregate market value of the voting and non-voting common stock
held by non-affiliates as of June 1, 2000, was $11,736,549
The number of common shares outstanding was 10,345,157 as of June 1,
2000.
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TABLE OF CONTENTS
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PART I
ITEM 1. DESCRIPTION OF BUSINESS......................................................................1
ITEM 2. DESCRIPTION OF PROPERTIES...................................................................10
ITEM 3. LEGAL PROCEEDINGS...........................................................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS ....................................................................12
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................................................13
ITEM 7. FINANCIAL STATEMENTS........................................................................16
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.....................................................16
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE SECTION 16(a) OF THE EXCHANGE ACT...................................17
ITEM 10. EXECUTIVE COMPENSATION......................................................................18
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..............................................................................20
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................................22
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............................................................22
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Nevada Gold & Casinos, Inc., which currently trades on the Boston Stock
Exchange under the ticker symbol "UWN" and the Over-the-Counter Bulletin Board
under the ticker symbol "UWIN" (hereinafter referred to as "UWIN"), has
developed its business primarily in the areas of gaming, real estate
development, and restaurant franchise operation. UWIN was founded in 1977 and
since 1993, its primary focus has been the development of gaming and real estate
properties in Colorado, California and New York.
Gaming Development
Isle of Capri Black Hawk
In April 1997, UWIN and Isle of Capri Casinos, Inc. ("Isle") (then
known as Casino America, Inc.), through wholly-owned subsidiaries, Black Hawk
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 currently the
largest gaming facility in Colorado. The Casino is strategically located at the
entrance to Black Hawk. The $103 million Casino features 1,113 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 annual renewal
of the gaming licenses issued by the Colorado Gaming Commission. 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 and open in early August of 2000. The hotel, once completed, will
be the largest hotel in the Black Hawk market.
UWIN has identified and is pursuing additional gaming ventures and
associated real estate resort/entertainment development projects. UWIN currently
creates associations with successful gaming operators for the development 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
Gold Mountain 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. During the year end March 31, 2000, GMD exchanged certain
acres of real property located in Gilpin County, Colorado for other acres of
real property owned by Proland Management, L.L.C. ("Proland"). In addition, GMD
extinguished a note receivable due from Proland in the amount of $160,045
including interest and issued to Proland a long term note payable of $47,098.
The casinos currently operating in Black Hawk employ in excess of 6,000
individuals. Because only limited residential housing is available in the Black
Hawk area, 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 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 projects.
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.
Blue Diamond Resorts
In March 2000 UWIN entered into an agreement to acquire over 800 acres
on Wellesley Island in New York state. In April 2000 the agreement was finalized
by UWIN's wholly-owned subsidiary, Blue Diamond Resorts, Inc., 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 area is approximately 90 miles north of Syracuse, New
York. The eight-mile long island has for many years capitalized on increased
domestic and international traffic that frequents this historic tourist
destination. The 1000 Island International Tourism Council has indicated that
there are over 19 million people within 300 miles of Wellesley Island. 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.
The Company has retained an engineering firm to evaluate the existing
infrastructure and improvements on the property, including water and sewer
treatment facilities.
Sunrise Land and Minerals
UWIN, through its wholly owned subsidiary, Sunrise Land and Mineral
Corporation, ("Sunrise"), a Nevada corporation acquired in 1995, owns
approximately 300 acres of land in Nevada County, California, including all
surface, mineral, water, air, and timber rights. Sunrise has
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been inactive since its acquisition in 1995. UWIN intends to evaluate the
highest and best use of Sunrise's land. The property also has potential for
residential and/or resort real estate development.
Restaurant Franchises
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. The KFC restaurant has been
converted into a Pizza Hut restaurant. UWIN believes that gaming may again
become legalized 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 again become legalized in Brazil, or that it
would in fact have an advantage if gaming is legalized in Brazil. The President
and Chairman of RCI is James Wong, who was elected a Director of UWIN in March
1999, and who is a turn-around expert and external change agent who has
performed consulting services 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.
Mining Interests
Goldfield Resources, Inc.
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 approximately 9,000 acres, to
Goldfield in exchange for all the 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
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.
Competition
Gaming Interests
The gaming and casino industry is subject to intense competition,
particularly in the State of Colorado. As the number of gaming establishments in
Black Hawk, 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,
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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. Two
additional casinos opened in Black Hawk in 2000. Rivieria's casino is on a site
directly across Main Street from the IC-BH Casino and Mardi Gras casino, is
located down Main Street. These two new casinos in Black Hawk are likely to
create additional competition for IC-BH.
The Casino's closest competition is Colorado Central Station and
Riveria, which are both located at the intersection of Mill and Main Streets
across from the Casino.
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.
Restaurant Franchises
Other global fast food restaurants have entered the Brazilian
marketplace and are general competitors of RCI. McDonald's, Bob's, and Dunkin
Donuts have each established a presence in Sao Paulo and in other areas of
Brazil. These restaurant companies have significantly greater financial and
other resources that could affect RCI's operations. Domino's re-entered the
pizza
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delivery market in Sao Paulo, Brazil, in 1998, but has closed three of its five
locations, due to intense competition from Pizza Hut.
Mining Interests
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 Interests
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 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
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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 projects. Any failure to receive any
required approvals could have a material impact on the real estate projects and
the development potential.
Restaurant Franchises
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 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
Gaming Interests
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 analysis and tests and
removed all mined waste located on the gaming site. No further remedial activity
has been required to date with respect to the Casino properties.
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
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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.
Mining Interests
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, 2000, UWIN has a staff of seven full-time employees who
are employed in executive, legal, accounting, and administrative functions. The
Company also employs one independent contractor.
Investment Considerations
Potential investors should carefully consider the following risk
factors prior to the purchase of UWIN common stock.
Cash Flow from Casino
There can be no absolute assurance at this time that the Casino will
generate sufficient operating cash flow to enable the joint venture to make
payments of principal and interest on debt financing. The Casino's cash flow is
distributed pursuant to the terms of the Amended and Restated Operating
Agreement and the Members Agreement for the joint venture; this makes an actual
cash distribution subject to there being cash reserves available after meeting
its operating expenses, capital improvements, debt service, working capital and
payroll obligations.
Substantial Leverage
IC-BH is highly leveraged, with substantial debt service in addition to
construction and operating expenses. The Casino is financed by $75 million of
13% First Mortgage Notes due 2004. The $29 million hotel on top of the Casino is
being 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 April
30, 2000, $14,562,000 has been funded from the Casino's cash flows and
$3,300,000 from the $5 million loan from Isle. IC-BH's current projections of
cash flow from the casino and available borrowings under existing loan
arrangements will not require equity contributions from the venture partners to
fund the hotel's construction costs.
The degree to which IC-BH is leveraged could have important
consequences including, but not limited to, the following: (i) its increased
vulnerability to adverse general economic and industry
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conditions; (ii) the dedication of a substantial portion of its operating cash
flow to the payment of principal and interest of indebtedness, thereby reducing
the funds available for operations and further development of IC-BH; and (iii)
its impaired ability to obtain additional financing for future working capital,
capital expenditures, acquisitions or other general corporate purposes. There
can be no assurance that any such additional financing will be available in the
future on terms satisfactory to IC-BH, if at all. Failure by IC-BH to obtain any
required additional financing in the future could have a material adverse effect
on its financial condition and results of operations.
Potential Inability to Repay Debt
IC-BH's ability to service its debt obligations is entirely dependent
upon the successful operation of IC-BH, its future operating performance, which
is itself dependent on a number of factors, many of which are outside of IC-BH's
control, including prevailing economic conditions and financial, business,
regulatory and other factors affecting operations. Assuming successful operation
of IC-BH, management believes that IC-BH's operating cash flow will be
sufficient to meet its current obligations as they come due, including debt
service. There can be no assurance, however, that IC-BH will continue to be
profitable or will generate sufficient operating cash flow to enable IC-BH to
service its indebtedness. If the IC-BH is unable to generate sufficient cash
flow, it could be required to adopt one or more alternatives, such as reducing
or delaying planned capital expenditures, selling assets, restructuring debt or
obtaining additional equity capital. There can be no assurances that any of
these alternatives could be effected on satisfactory terms, if at all.
Permits and Approvals
The operation of the IC-BH hotel will be contingent upon, among other
things, IC-BH's receipt and maintenance of all required certificates of
occupancy and authorizations. Unexpected changes or concessions required by
local, state or federal regulatory authorities could involve significant
additional costs and delay or prevent the continual opening of the facilities.
Any failure to receive any required approvals could have a material adverse
effect on the Casino and its ability to pay amounts due under its debt financing
obligations. The properties being developed at Wellesley Island and adjacent to
the Casino and hotel at Black Hawk are also subject to the permitting and
governmental approval process.
Dependence Upon Single Gaming Site
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. 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.
Adverse Weather and Road Conditions; Seasonality
The city of Black Hawk is located in the Colorado Rocky Mountains,
which can be subject to inclement weather. Wind, blizzard, flood or other severe
weather conditions could (i) cause
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significant physical damage to IC-BH or (ii) result in reduce hours of operation
or access to IC-BH, or (iii) the complete closure of IC-BH for a period of time,
any of which may have a material adverse effect on IC-BH. In addition, the city
of Black Hawk is serviced by winding mountain roads that require extremely
cautious driving, particularly in bad weather. These roads have tunnels that are
subject to closure. In addition, congestion on the roads leading to Black hawk
is not uncommon during the peak summer season, holidays and other times of year
and may discourage potential customers from traveling to IC-BH, particularly if
road construction is in process.
IC-BH expects the highest level of customer visits to occur during the
summer months, due to more favorable weather conditions. Therefore, a poor
summer season, due to any cause, including causes outside IC-BH's control, could
have a material adverse effect on IC-BH.
State Gaming Tax Issues
The amendment of the Colorado constitution that legalized limited gaming also
subjects casinos in Colorado to a gaming tax of up to 40% of adjusted gross
proceeds of gaming operations ("AGP"). AGP is generally defined as the total
amounts wagered, less all payments to players. The current tax is: .25 of 1% on
the first $2 million of AGP; 2% on AGP from $2 million to $4 million; 4% on AGP
from $4 million to $5 million; 11% on AGP from $5 million to $10 million; 16% on
AGP between $10 million to $15 million; and 20% on AGP over $15 million. In
1992, the citizens of Colorado passed Amendment No. 1 to the Colorado
constitution that requires any change in tax rates or any new tax to be voted on
by the electorate. Nevertheless, in 1996, the Colorado Commission, by
promulgation of a regulation, raised the tax rate on AGP; then the Commission
reduced those rates in 1999. There can be no assurance that tax rates or fees
applicable to IC-BH Casino will not be increased in the future, either by the
Colorado electorate, legislation or action by the Colorado Commission, resulting
in an adverse effect on the Casino's operations. Effective October 1 of each
year, the Colorado Commission establishes the gaming tax for the following 12
months.
Dependence on Key Personnel
The success of UWIN is largely dependent upon the efforts and skills of
the key executive officers of UWIN. The loss of the services of any key
executive officers could have a material adverse effect on UWIN. There can be no
assurance that UWIN would be able to attract and hire suitable replacements in
the event of any such loss of services.
Difficulty in Attracting and Retaining Qualified Employees
The operation of the UWIN's business requires qualified executives,
managers and skilled employees with gaming industry experience and
qualifications to obtain the requisite licenses. UWIN believes that a shortage
of skilled labor, which exists in the gaming industry, will make it increasingly
difficult and expensive to attract and retain qualified employees. Increasing
competition in the Black Hawk Market may lead to higher costs in order to retain
and attract qualified employees. UWIN may incur higher labor costs to attract
qualified employees from existing gaming facilities. While UWIN believes that it
will be able to attract and retain qualified employees, there can be no
assurance that UWIN will be able to do so.
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ITEM 2. DESCRIPTION OF PROPERTIES
General
UWIN's principal assets consist of its 43% ownership interest in IC-BH,
which owns the Casino-hotel complex in Black Hawk, the 240 acres of undeveloped
land in and around Black Hawk, Colorado, the Wellesley Island property which is
over 800 acres, located in Jefferson County, New York, and the 300 acres of
undeveloped land in Nevada County, California. The Colorado, California and New
York 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 $4,550. UWIN believes that its
existing facilities are adequate to meet its current needs.
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 develops assets primarily
for growth and high yield 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 IC-BH 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. The $29 million
hotel on top of the Casino is being financed by (i) cash flows from the Casino,
(ii) up to 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 April 30, 2000, $14,562,000 has been funded from the
Casino's cash flows and $3,300,000 from the $5 million loan from Isle.
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; or
approximately $65,500 annually, paid by IC-BH.
240 Acres of Undeveloped Land in and near Black Hawk, Gilpin County,
Colorado
UWIN's second largest asset is the 240 acres of undeveloped land
located in and near Black Hawk, Gilpin County, Colorado. This property is
subject to liens in the aggregate amount of $642,043; $600,000 of that debt
obligation matures on August 19, 2000. Insurance is carried for this acreage.
The realty tax rate on this property is $28.021 per $1,000 in property value, or
approximately $3,500 annually.
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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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 6, 2000, UWIN held its Annual Shareholders' Meeting in
Houston, Texas, and submitted several matters to the shareholders for approval.
Messrs. Wong, Winn, Jayroe, and Burkett were all re-elected directors by a
majority vote of the shareholders. The shareholders voted to ratify the
selection of Pannell Kerr Forster of Texas, P.C., as auditors for UWIN, for the
fiscal year ending March 31, 2000.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The common stock is traded on the Boston Stock Exchange ("UWN") and the
Over-the-Counter Bulletin Board ("UWIN"). The market for UWIN's common stock is
limited, volatile, and sporadic. The following table sets forth the high and low
market prices relating to UWIN's common stock for the last two fiscal years.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
MARCH 31, 2000 MARCH 31, 1999
------------------ ------------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
First Quarter $ 4.937 $ 2.187 $ 4.250 $ 2.156
Second Quarter 3.125 1.968 4.090 2.750
Third Quarter 3.562 1.687 5.688 3.688
Fourth Quarter 3.375 2.437 6.250 3.500
</TABLE>
Holders
As of March 31, 2000, UWIN had approximately 4,500 shareholders of
record.
Dividends
No dividends have ever been declared by UWIN on its common stock. UWIN
has no plans to pay common dividends in the foreseeable future and intends to
retain future earnings to finance growth and to meet working capital
requirements.
Changes in Securities
The following stock issuances occurred between January 1 and March 31,
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 these offerings and no
commissions were paid.
UWIN issued 29,444 shares of common stock to two accredited investors
for an aggregate purchase price of approximately $60,000.
UWIN issued 139,334 shares of common stock to two accredited investors
for an aggregate purchase price of approximately $212,000 in connection with the
exercise of options issued.
UWIN issued 3,039 shares of common stock for services to two
individuals for an aggregate purchase price of approximately $6,000.
UWIN issued 20,499 shares of common stock for services to two companies
for an aggregate purchase price of approximately $49,000.
12
<PAGE> 15
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 its operations.
General
UWIN is primarily engaged in gaming, real estate development, and
restaurant franchise operations. UWIN reported net income of $796,730 for the
year ended March 31, 2000 compared to a net loss of $1,661,331 for the year
ended March 31, 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 year ended March 31, 2000, IC-BH's income allocable to
UWIN through April 30, 2000, IC-BH's fiscal year end, totaled $3,798,512. All
losses previously suspended under the equity method of accounting have been
restored and UWIN's basis in the project through April 30, 2000 is $2,299,076.
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.
New Accounting Pronouncements
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"). 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
derivatives, 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"). 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. The Company 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.
13
<PAGE> 16
Results of Operations
Comparison of fiscal years ended March 31, 2000 and 1999
REVENUES. Revenues decreased 25%, or $113,882, to $340,072 for the year
ended March 31, 2000, compared to $453,954 in fiscal 1999. The decrease in
revenues is primarily attributable to two fiscal 1999 transactions: a gain from
the sale of Colorado real estate recorded in the amount of $197,304 and the sale
of a part interest in IC-BH in the amount of $147,851. The decrease in the
current year revenue is partially offset by an increase in interest income in
the amount of $159,958, an increase in royalty income in the amount of $16,000,
and an increase in other income in the amount of $55,315. Income from IC-BH is
recorded under the equity method of accounting and is not reflected in the gross
revenues.
INTEREST INCOME. Interest income increased 185%, or $159,958 to
$246,651 for the year ended March 31, 2000, from $86,693 in fiscal 1999. The
difference is attributable to an increase in notes receivable.
OTHER INCOME. Other income increased 906%, or $55,315, to $61,421 for
the year ended March 31, 2000, compared to $6,106 in fiscal 1999. This increase
is due primarily to proceeds received from a claim settlement.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased 14%, or $62,219, to $369,090 for the year ended March 31,
2000, compared to $431,309 in fiscal 1999. The decrease is primarily
attributable to a reduction in travel, telephone, and office expenses. Also,
UWIN began paying Mr. Winn's salary directly in September 1998, and therefore
terminated its contract with Aaminex for the services of Mr. Winn. Accordingly,
five months of salary expense for fiscal year 1999 amounting to $41,000 was
classified as a general and administrative expense with the balance for fiscal
year 1999 reflected as salary expense.
INTEREST EXPENSE. Interest expense increased 72%, or $158,173, to
$378,751 for the year ended March 31, 2000, compared to $220,578 in fiscal 1999
due to a 175% increase in the weighted average debt outstanding during the year
ended March 31, 2000.
SALARIES. Salaries increased 14%, or $43,706, to $353,743 for the year
ended March 31, 2000, compared to $310,037 in fiscal 1999. 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 a general and administrative expense to Aaminex.
LEGAL AND PROFESSIONAL FEES. Legal and professional fees increased
110%, or $334,447, to $639,271 for the year ended March 31, 2000, compared to
$304,824 in fiscal 1999. The increase is primarily due to UWIN expensing stock
options issued for consulting services and $200,000 paid to a business
consulting firm.
14
<PAGE> 17
OTHER EXPENSES. Other expenses decreased 42%, or $45,799, to $64,374
for the year ended March 31, 2000, compared to $110,173 in fiscal 1999. The
decrease was due primarily to a reduction in printing costs, insurance expense,
and a write-off in fiscal 1999 of expenses incurred to investigate an outside
project which was ultimately not pursued.
NET INCOME (LOSS). UWIN reported net income of $796,730 for the fiscal
year ended March 31, 2000 as compared to a loss of $1,661,331 in fiscal 1999.
This increase was primarily the result of UWIN reporting equity in earnings from
IC-BH in the amount of $2,299,076.
Liquidity and Capital Resources
OPERATING ACTIVITIES. Cash used in operating activities during the year
ended March 31, 2000, amounted to $1,182,608, an increase of 22%, or $210,118
over the $972,490 of cash used in operating activities during fiscal 1999. The
increase is attributable to slightly higher operating costs.
INVESTING ACTIVITIES. Cash used in investing activities during the year
ended March 31, 2000, amounted to $1,873,621, a decrease of $398,566, over the
$2,272,187 of cash used in investing activities in fiscal 1999. The decrease is
primarily due to the repurchase of an interest in IC-BH for $500,000 reflected
in fiscal 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 year ended March 31, 2000, UWIN received $420,449
from cash sales of its common stock, a decrease of 71%, or $1,046,623 compared
to the $1,467,072 received from cash sales of common stock in the year ended
March 31, 1999. During the year ended March 31, 2000, UWIN received proceeds of
$5,082,410 from debt, an increase of 116%, or $2,730,024, over the $2,352,386
received from proceeds of debt in the year ended March 31, 1999. During the year
ended March 31, 2000, UWIN expended $1,056,206 for payments on outstanding debt,
an increase of 290%, or $785,101, over the $271,105 expended for payments on
outstanding debt in fiscal 1999.
At March 31, 2000, UWIN had a cash balance of $1,489,735, a working
capital deficit of $253,397, and short term notes payable of $1,817,999 of which
$1,600,000 matures in August 2000. UWIN intends to refinance the $1,600,000 of
indebtedness or repay such amount by drawing down on its $7 million credit
facility, (the "Credit Facility"). UWIN entered into the 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, payable
monthly, with principal maturing on December 24, 2004. The debt drawn down from
the Credit Facility is secured by UWIN's interest in the Casino. At the option
of the holder, up to 50% of any unpaid principal and/or accrued interest is
convertible into shares of UWIN's restricted common stock at the rate of $3.00
per share or 85% of the closing market price at the date of conversion,
whichever is less. UWIN agrees to maintain at all times a sufficient number of
authorized but unissued shares of its common stock to perform this conversion.
As of March 31, 2000, UWIN has drawn down a total of $4,363,410, leaving
$2,636,590 available for future borrowings. UWIN believes its current working
capital and available funds under the Credit Facility provide sufficient
liquidity for the balance of fiscal 2001.
15
<PAGE> 18
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.
Year 2000 Compliance Issues
We completed our assessment of the year 2000 processing issues of
internal technology systems, considering our current financial and accounting,
computer systems and software. We experienced no Year 2000 problems either
internally or related to third parties.
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." See
F-1 for Index to Consolidated Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
<PAGE> 19
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:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
H. Thomas Winn 60 Chairman of the Board of Directors, Chief
Executive Officer, and President
Paul Burkett 78 Vice President and Director
William G. Jayroe 43 Secretary and Director
James Wong 53 Director
</TABLE>
H. THOMAS WINN has served as Chairman, Chief Executive Officer, and
President of UWIN since January 1994. Mr. Winn is also President of Aaminex
Capital Corp, a financial consulting and venture capital firm, where during his
tenure he was responsible for the merger of the Colorado real estate property
with Pacific Gold Corporation, UWIN's predecessor. Mr. Winn has formed numerous
investment limited partnerships and capital formation ventures ranging from
motion pictures to real estate development, mining and food and beverage related
ventures.
PAUL J. BURKETT has served as Vice President and a Director of UWIN
since 1991. Mr. Burkett has been involved in the mining and real estate industry
for over 40 years. He has also served on the Board of Directors of Aaminex for
15 years. Mr. Burkett has been President of Goldfield Resources, Inc., a
wholly-owned subsidiary of UWIN, since June 1998. In addition, Mr. Burkett has
been Chairman of the Board of Trustees of the Joshua Tree Retreat Center, a
400-acre retreat located in Joshua Tree, California, since 1998.
WILLIAM G. JAYROE has served as Director of UWIN since 1995, and was
elected Secretary of UWIN in March 1999. Mr. Jayroe is Vice President/Strategic
Business Development of Applied Training Resources, a software development
company. Mr. Jayroe has two decades of technology development, sales, and
management expertise in the petrochemical and software industries.
JAMES WONG has served as a Director of UWIN since March 1999. Mr. Wong
is a turnaround manager and change agent with 30 years of experience designing
and leading corporate change in Fortune 100 companies worldwide. He serves as
Chairman of Restaurant Connections International, Inc., which is 30% owned by
UWIN. In addition, Mr. Wong serves as CEO of Service Interactive, a foodservice
equipment installation and maintenance company with a virtual network of 7,500
technicians supporting large restaurant chains, OEMs, and food companies
throughout the U.S. Mr. Wong serves on the boards of RCI and Service
Interactive.
17
<PAGE> 20
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, 2000,
except in the following instances. Mr. Burkett did not timely file a Form 4 in
January 2000. He subsequently filed his Form 5 in June 2000. Mr. David McCaleb,
former secretary of UWIN, did not timely file a Form 4 in December 1999, but
subsequently filed the Form 4 in February 2000. Clay County Holdings, Inc did
not timely file a Form 4 for September 1999, but subsequently filed a Form 4 in
November 1999. Winstock Mining Corp. (US) ("Winstock") did not timely file a
Form 4 in June 1999, but subsequently filed a Form 4 in July 1999. Aaminex sold
certain of its rights to purchase common stock from a third party but
subsequently filed a Form 5 in June 2000. Mr. Wong, Mr. Winn, Mr. Burkett, and
Mr. Jayroe did not timely file Form 4's for options that were granted in October
1999, but subsequently filed Form 5's in June 2000.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------------------------------------------------------------------------
Awards Payouts
------------------------ -----------------
Name and Restricted Securities All
Principal Other Annual Stock Underlying LTIP Other
Position Year Salary Compensation Award(s) Options Payouts Comp.
--------- ---- ------ ------------ ---------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
H. Thomas Winn, 2000 $150,000(1) -- -- -- --
President/CEO 1999 $100,000(1) -- -- -- --
1998 $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. Since
September 1, 1998, Mr. Winn is being an annual salary directly by UWIN.
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.
18
<PAGE> 21
Option Grants Table
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options Granted
Underlying to Employees in Exercise of Expiration
Name Options Granted the Fiscal Year Base Price Date
------------------------------------------ ---------------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C>
H. Thomas Winn 150,000 5.4% $2.06 10/8/04
------------------------------------------ ---------------------- --------------------- --------------- --------------
</TABLE>
Additionally, UWIN granted options to Mr. Burkett and Mr. Jayroe in the
amount of 100,000 shares each for compensation in 1997 and 1998. UWIN also
granted Mr. Burkett, Mr. Jayroe, and Mr. Wong options in the amount of 50,000
each for services in 1999.
Aggregated Options Exercises and Fiscal Year-End Options Value Table
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Securities In-The-
Underlying Money
Shares Value Options at FY- Options at
Officer Name Acquired Realized End FY-End
------------------------------------------ ------------------ ------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
H. Thomas Winn
President, CEO, Director -- $ -- 150,000 $103,500
------------------------------------------ ------------------ ------------- ---------------------- ------------------
</TABLE>
All options held by Mr. Winn are exercisable.
Long-Term Incentive Plan ("LTIP") Awards Table
UWIN granted no long-term incentives to any or its Officers during the fiscal
year ended March 31, 2000.
Compensation of Directors
UWIN's Directors receive no standard compensation for their services as
Directors, but are reimbursed their travel expenses.
19
<PAGE> 22
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of June 1, 2000, 10,345,157 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)
Amount and
Name and Address Nature of
Title of Class Of Beneficial Owner Beneficial Owner Percent of Class
----------------------- ------------------------------------ --------------------- --------------------------
<S> <C> <C> <C>
Winstock Mining Corp. (US)
1506-2008 Fullerton Ave. 1,570,828 15.2%
Common Stock North Vancouver, BC
V7P 3G7
----------------------- ------------------------------------ --------------------- --------------------------
Common Stock Aaminex Capital Corp.(*)
3040 Post Oak Blvd., 1,115,407 10.8%
Suite 675
Houston, Texas 77056
----------------------- ------------------------------------ --------------------- --------------------------
Common Stock Clay County Holdings, Inc.
3040 Post Oak Blvd., 2,526,344 24.4%
Suite 675
Houston, Texas 77056-
----------------------- ------------------------------------ --------------------- --------------------------
</TABLE>
(*) Aaminex owns 180,816 shares outright, and 934,591 shares are the subject of
an option agreement to exercise the shares held by Winstock.
20
<PAGE> 23
Security Ownership of Management
The following table sets forth the ownership of UWIN common stock by all
Officers and Directors as of June 1, 2000.
<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, 1,298,741 12.6%
Common Stock CEO/President and Director(1)
3040 Post Oak Blvd.,
Suite 675
Houston, Texas 77056
----------------------- --------------------------------- ------------------------ --------------------------
Paul J. Burkett, Vice President 380,698 3.7%
Common Stock And Director(2)
P. O. Box 761
Goldfield, Nevada 89013
----------------------- --------------------------------- ------------------------ --------------------------
William G. Jayroe, Secretary 172,088 1.7%
Common Stock And Director(3)
3040 Post Oak Blvd., Suite 675
Houston, Texas 77056-6588
----------------------- --------------------------------- ------------------------ --------------------------
Common Stock James Wong, Director 50,000 .49%
2329 Coit Road, Suite B
Plano, Texas 75075
----------------------- --------------------------------- ------------------------ --------------------------
Common Stock All Officers and Directors 1,901,527 18.4%
</TABLE>
(1) Except for 33,334 shares and options to purchase 150,000 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. 934,591 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
150,000 shares.
(3) Included in Mr. Jayroe's beneficial ownership are options to purchase
150,000 shares.
(4) Mr. Wong's beneficial ownership consists of options to purchase 50,000
shares.
21
<PAGE> 24
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended March 31, 2000, UWIN loaned Clay County
Holdings, Inc. ("CCH") $624,762 for working capital purposes. Also during
fiscal 2000, CCH purchased, for itself or its assigns, 38,865 shares of UWIN
restricted common stock for cash of $61,923. During the year ended March 31,
1999, GMD loaned CCH $1,306,547 for working capital purposes. Also during
fiscal 1999, CCH purchased, for itself or its assigns, 219,555 shares of UWIN
restricted common stock for cash of $302,209. In addition, during fiscal year
1999, CCH loaned RCI $600,000 for working capital purposes.
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, 2000, and 1999,
the undeclared cumulative dividends on the preferred stock that remains
outstanding totals $312,653 and $142,865, respectively.
ITEM 13. 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.
22
<PAGE> 25
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: June 29, 2000
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.
<TABLE>
<CAPTION>
Name & Position Date
<S> <C>
/s/ H. Thomas Winn June 29, 2000
------------------------------------ -------------
H. Thomas Winn, President, CEO,
and Director
/s/ Paul J. Burkett June 29, 2000
------------------------------------ -------------
Paul J. Burkett, Director and
Vice President
/s/ William G. Jayroe June 29, 2000
------------------------------------ -------------
William G. Jayroe, Director and
Secretary
/s/ James Wong June 29, 2000
------------------------------------ -------------
James Wong, Director
</TABLE>
23
<PAGE> 26
Nevada Gold & Casinos, Inc.
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent public accountants..............................................................F-2
Consolidated Balance Sheets as of March 31, 2000 and 1999.............................................F-3
Consolidated Statements of Operations for the years ended
March 31, 2000 and 1999.......................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 2000 and 1999...........................................................................F-5
Consolidated Statements of cash flows for the years ended
March 31, 2000 and 1999...........................................................................F-6
Notes to consolidated financial statements.........................................................F-7-24
</TABLE>
F-1
<PAGE> 27
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) as of March 31, 2000 and
1999, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. 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 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nevada Gold &
Casinos, Inc. and Subsidiaries as of March 31, 2000 and 1999 and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
June 2, 2000
Pannell Kerr Forster of Texas, P.C.
Houston, Texas
F-2
<PAGE> 28
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,489,735 $ 161,234
Notes receivable -- 154,763
Other assets 174,401 153,315
------------ ------------
TOTAL CURRENT ASSETS 1,664,136 469,312
Investment in Isle of Capri Black Hawk 2,299,076 --
Gold Mountain Development, LLC 2,025,423 1,807,489
Blue Diamond Resorts, Inc. 185,650 --
Sunrise Land & Minerals, Inc. 371,750 371,750
Goldfield Resources, Inc. 480,812 480,812
Note Receivable from affiliates 1,995,013 1,306,547
Note Receivable - other 1,032,161 --
Furniture, fixtures and equipment, net of accumulated depreciation
of $144,202 in 2000 and $114,767 in 1999 85,149 93,836
------------ ------------
TOTAL ASSETS $ 10,139,170 $ 4,529,746
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 30,999 $ 102,494
Accrued interest payable 21,157 125,993
Short term notes payable 1,817,999 1,735,000
Current portion of long term debt 47,378 28,942
------------ ------------
TOTAL CURRENT LIABILITIES 1,917,533 1,992,429
LONG-TERM DEBT
Mortgages payable, net of current portion 17,258 38,731
Notes payable, net of current portion 4,449,334 508,240
------------ ------------
TOTAL LONG-TERM DEBT 4,466,592 546,971
------------ ------------
TOTAL LIABILITIES 6,384,125 2,539,400
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares authorized,
141,490 shares outstanding at March 31, 2000 and 1999, respectively 1,414,900 1,414,900
Common stock, $0.12 par value, 20,000,000 shares authorized, 10,341,040
and 9,811,664 shares outstanding at March 31, 2000, and 1999, respectively 1,240,924 1,177,400
Additional paid in capital 9,599,940 8,695,495
Accumulated deficit (8,500,719) (9,297,449)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,755,045 1,990,346
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,139,170 $ 4,529,746
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE> 29
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Royalty income $ 32,000 $ 16,000
Gain on sale of part interest in Isle of
Capri Black Hawk -- 147,851
Gain on sale of Colorado Real Estate -- 197,304
Interest income 246,651 86,693
Other income 61,421 6,106
------------ ------------
TOTAL REVENUES 340,072 453,954
------------ ------------
EXPENSES
General and administrative 369,090 431,309
Interest expense 378,751 220,578
Salaries 353,743 310,037
Legal and professional fees 639,271 304,824
Other 64,374 110,173
------------ ------------
TOTAL EXPENSES 1,805,229 1,376,921
------------ ------------
Equity in earnings (loss) of Isle
of Capri Black Hawk 2,299,076 (656,275)
Equity in loss of RCI (37,189) (82,089)
------------ ------------
NET INCOME (LOSS) $ 796,730 $ (1,661,331)
============ ============
PER SHARE INFORMATION
Net income (loss) $ 796,730 $ (1,661,331)
Preferred stock dividends accumulated (169,788) (169,788)
------------ ------------
Net income (loss) available to common
stockholders $ 626,942 $ (1,831,119)
============ ============
Net income (loss) per common share -- basic $ 0.06 $ (0.20)
============ ============
Net income (loss) for common share -- diluted $ 0.06 $ (0.20)
============ ============
Basic weighted average number of
common shares outstanding 10,018,297 9,274,986
------------ ------------
Diluted weighted average number of
common shares outstanding 10,257,841 9,274,986
------------ ------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 30
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Shares Amount Shares Amount
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Balance at 4/01/98 141,490 $ 1,414,900 8,822,464 $ 1,058,696
Stock issued for cash 713,655 85,639
Stock issued for note conversion 155,737 18,688
Stock issued for services 152,558 18,307
Preferred stock dividends
Cancelled/retired stock (42,750) (5,130)
Stock issued for asset 10,000 1,200
Net loss
------------ ------------ ------------ -----------
Balance at 3/31/99 141,490 1,414,900 9,811,664 1,177,400
Stock issued for cash 237,878 28,545
Stock issued for note conversion 38,476 4,616
Stock issued for services 253,022 30,363
Net income
------------ ------------ ------------ -----------
Balance at 3/31/00 141,490 $ 1,414,900 10,341,040 $ 1,240,924
============ ============ ============ ===========
<CAPTION>
Additional Total
Paid Accumulated Stockholders'
In Capital Deficit Equity
------------ ------------ -------------
<S> <C> <C> <C>
Balance at 4/01/98 $ 7,095,896 $ (7,636,118) $ 1,933,374
Stock issued for cash 1,381,433 1,467,072
Stock issued for note conversion 301,889 320,577
Stock issued for services 240,597 258,904
Preferred stock dividends (200,000) (200,000)
Cancelled/retired stock (148,120) (153,250)
Stock issued for asset 23,800 25,000
Net loss (1,661,331) (1,661,331)
------------ ------------ -------------
Balance at 3/31/99 8,695,495 (9,297,449) 1,990,346
Stock issued for cash 391,904 420,449
Stock issued for note conversion 97,165 101,781
Stock issued for services 415,376 445,739
Net income 796,730 796,730
------------ ------------ -------------
Balance at 3/31/00 $ 9,599,940 $ (8,500,719) $ 3,755,045
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 31
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 796,730 $(1,661,331)
Adjustment to reconcile net income (loss) to net cash
used in operating activities
Depreciation 29,435 33,090
Equity in net loss (income) of Isle of Capri Black (2,299,076) 656,275
Hawk
Equity in net loss of RCI 37,189 82,089
Consultant, investment bankers, and other
option expense 445,739 258,904
Gain on sale - part interest in Isle of Capri Black -- (147,851)
Hawk
Gain on sale of Colorado real estate -- (197,304)
Changes in operating assets and liabilities:
Prepaid expenses and other assets (16,294) (135,104)
Accounts payable and liabilities (176,331) 138,742
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,182,608) (972,490)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of real estate and assets held for development (198,889) (191,881)
Purchases of furniture, fixtures and equipment (2,645) (6,254)
Repurchase of interest in Isle of Capri Black Hawk -- (500,000)
Notes receivable from RCI (15,164) (104,115)
Notes receivable from an affiliate (686,685) (1,803,356)
Notes receivable - other (1,032,161) --
Proceeds from disposition of property -- 36,610
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,935,544) (2,568,996)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Common stock issued for cash, net of offering costs 420,449 1,467,072
Proceeds from debt 5,082,410 2,352,386
Payments on debt (1,056,206) (271,105)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,446,553 3,548,353
----------- -----------
NET INCREASE IN CASH 1,328,501 6,867
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 161,234 154,367
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,489,735 $ 161,234
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID FOR INTEREST $ 478,745 141,458
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 32
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
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"), since 1993 has
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, Black Hawk 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%.
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 and opened in early August
2000.
In addition, UWIN and/or its subsidiaries own interest 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 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 UWIN's needs
through the fiscal year 2001. However, UWIN cannot assure that its portion of
the cash flow from the IC-BH will be sufficient to fund its working capital
requirements for fiscal year 2001. 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 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 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 successful completion and
operation of the hotel being constructed on top of the casino.
F-7
<PAGE> 33
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 March 31, 2000, and 1999, 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 (see Note 15). 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"). 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 derivatives, 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"). 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. 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
F-8
<PAGE> 34
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
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
Statement of Financial Accounting Standards No. 109 - "Accounting for Income
Taxes," ("SFAS No. 109") 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," ("SFAS No. 128") 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," ("SFAS No. 123"). 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 Opinion
No. 25 "Accounting for Stock Issued to Employees," ("APB No. 25"), 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.
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, 2000 and 1999. 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.
F-9
<PAGE> 35
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
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.
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 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 being 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 April 30, 2000, $14,562,000 has been
funded from the Casino's cash flows and $3,300,000 from the $5 million 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 year ended March 31, 2000, IC-BH's undistributed earnings
allocable to UWIN through April 30, 2000 totaled $3,798,512. All losses
previously suspended under the equity method of accounting have been restored
and UWIN's basis in the project through April 30, 2000 is $2,299,076.
F-10
<PAGE> 36
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
The following is a summary of condensed financial information pertaining to the
IC-BH as of its fiscal year ended April 30, 2000:
Isle of Capri Black Hawk, L.L.C.
Condensed Balance Sheet
as of April 30, 2000
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Current assets $ 7,613
Property and equipment 98,712
Other assets 3,568
-----------
Total assets $ 109,893
===========
Current liabilities $ 18,501
Long-term debt 75,000
Members' equity 16,392
----------
Total liabilities and members' equity $ 109,893
==========
</TABLE>
Isle of Capri Black Hawk, L.L.C.
Condensed Income Statement
For the year ended April 30, 2000
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Revenue:
Casino $ 88,548
Food, beverage, and other 11,774
----------
Total revenue 100,322
Operating expenses:
Casino 5,746
Gaming taxes 17,340
Food, beverage, and other 55,762
----------
Total operating expenses 78,848
Earnings from Operations 21,474
----------
Interest expense, net 10,754
Depreciation 2,114
----------
Net income $ 8,606
==========
</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.
F-11
<PAGE> 37
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
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. During the year ended March 31, 2000, GMD exchanged
certain acres of real property located in Gilpin County, Colorado, for certain
acres of real property owned by Proland Management, L.L.C. ("Proland").
Components of the exchange include GMD extinguishing a note receivable due from
Proland in the amount of $160,045 including interest and the issuance to Proland
of a long term note payable in the amount of $47,098. The note payable bears
interest at a rate of 10% per annum with principal and interest payable at
maturity. This land exchange resulted in an additional 70 acres net to UWIN
increasing its holdings to approximately 240 acres contiguous to the city of
Black Hawk.
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.
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.
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. The KFC restaurant has been
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.
F-12
<PAGE> 38
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
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 year ended
March 31, 2000, RCI's undistributed losses allocable to UWIN through December
31, 1999 totaled $427,209. In accordance with the equity method of accounting,
UWIN's investment account balance was reduced to zero and the remaining
allocated loss of $390,020 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. ("Romarco"), 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.
Under the terms of the lease with Romarco, Romarco made 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 increased 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.
F-13
<PAGE> 39
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 7. SHORT-TERM NOTES PAYABLE
Short-term notes payable consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
---------------------------
2000 1999
------------- -----------
<S> <C> <C>
Note payable to individual, bearing interest at 12%, payable August 1999,
extended until August 2000. Note is secured by a pledge of 1,000,686 shares of
UWIN stock. Holder has option of converting all or a portion of principal and
accrued interest into shares of UWIN common stock at a rate of $3.00 per share
or 85% of the average closing price of UWIN common stock for the ten days prior
to the date of election of conversion. $ 1,000,000 $ 1,000,000
Note payable to individual, bearing interest at 12%, payable August 1999,
extended until August 2000. Note is secured by real property consisting of
undeveloped land in Gilpen County, Colorado. Holder has option of converting all
or a portion of principal and accrued interest into shares of UWIN common stock
at a rate of $3.00 per share or 85% of the average closing price of UWIN common
stock for the ten days prior to the date of election of conversion. 600,000 600,000
Note payable to individual, bearing interest at 12%, payable on demand 15,000 35,000
Note payable to individual, bearing interest at 12%, payable May 1999 -- 100,000
Note payable to investment group, bearing interest at 12% payable
November 2000 28,125 --
Note payable to individual, bearing interest at 12%, payable October
2000 50,000 --
Note payable to individual, bearing interest at 12%, payable on
demand 50,000 --
Note payable to individual, bearing interest at 11%, payable October
2000 74,874 --
------------- -----------
Total short-term notes payable $ 1,817,999 $ 1,735,000
============= ===========
</TABLE>
F-14
<PAGE> 40
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 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 Gilpin County,
Colorado. The mortgages outstanding are as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Note payable, interest at 8%, principal and interest payable in monthly
installments of $1,262, through January 2001 $ 12,201 $ --
Note payable, interest at 8%, principal and interest payable in monthly
installments of $650 through April 2001 7,744 14,403
Note payable, interest at 8.5%, principal and interest payable in monthly
installments of $575, through December 2003 22,098 26,893
Note payable, interest at 8%, principal and interest payable in monthly
installments of $500, through July 2000 -- 13,957
-------- --------
Total mortgages payable 42,043 55,253
Current portion of mortgages payable (24,785) (16,522)
-------- --------
Long-term mortgages payable $ 17,258 $ 38,731
======== ========
</TABLE>
The aggregate principal maturities on long-term mortgages for the years ending
March 31, are as follows:
<TABLE>
<S> <C>
2001 $ 24,785
2002 6,074
2003 6,189
2004 4,995
--------
Total $ 42,043
========
</TABLE>
F-15
<PAGE> 41
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
OTHER LONG-TERM NOTES AND CAPITAL LEASES PAYABLE - Long-term notes and
capital leases payable are as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Capital leases for acquisition of computers, principal and interest payable in
monthly installments in the amount of $1,345, maturing 2001 $ 8,239 $ 20,660
Capital leases for acquisition of computers, principal and interest payable in
monthly installments in the amount of $1,262, maturing 2004 7,777 --
Note payable for the acquisition of a company owned vehicle, principal and
interest payable in monthly installments of $530, maturing December 2002
15,403 --
Note payable to investment group, bearing interest at 10%, maturing September
2001 47,098 --
Note payable to individual, bearing interest at 11%, maturing December 2004 4,363,410 --
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
----------- -----------
Total other long-term notes and capital leases payable 4,471,927 520,660
Current portion of long-term notes and capital leases payable (22,593) (12,420)
----------- -----------
Long-term notes payable $ 4,449,334 $ 508,240
=========== ===========
</TABLE>
UWIN has entered into lease agreements for computer equipment. Future minimum
lease payments for noncancellable capital leases for the years ending March 31,
are as follows:
<TABLE>
<S> <C>
2001 $ 24,564
2002 15,150
2003 15,150
2004 15,150
--------
70,014
Interest and sales tax (23,998)
--------
Net present value $ 46,016
========
</TABLE>
F-16
<PAGE> 42
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
On December 23, 1999, UWIN entered into a continuing loan agreement (the "Credit
Facility") with an individual. The Credit Facility provides for maximum
borrowings of up to $7,000,000 bearing interest at 11%. Interest is due in
monthly installments beginning January 31, 2000 and all principal and any
accrued, unpaid interest is due and payable in full on December 23, 2004. The
Credit Facility is secured by UWIN's ownership in IC-BH. At the option of the
holder, up to 50% of any unpaid principal and/or accrued interest is convertible
into shares of UWIN's restricted common stock at the rate of $3.00 per share or
85% of the closing market price at the date of conversion, whichever is less.
UWIN agrees to maintain at all times a sufficient number of authorized but
unissued shares of its common stock to perform this conversion. Borrowings under
this Credit Facility totaled $4,363,410 at March 31, 2000 with $2,636,590
available for future borrowings.
NOTE 9. INCOME TAXES
UWIN has adopted SFAS No. 109, "Accounting for Income Taxes" ("SFAS no. 109").
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 ("NOLs"). For the year ended March 31, 2000, UWIN
had NOLs amounting to $8,838,255. The NOLs expire in the years ending March 31,
as follows:
<TABLE>
<S> <C>
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 1,110,359
2014 1,797,143
2019 1,923,089
----------
$8,838,255
==========
</TABLE>
The NOLs are subject to certain limitations under the Internal Revenue Code.
UWIN has a deferred tax asset totaling $3,005,007 and $2,440,801 as of March 31,
2000, and 1999, respectively, as a result of the future tax benefit attributable
to NOLs, determined by applying the enacted statutory rate of 34%. However, UWIN
believes that the utilization of these NOLs could be significantly limited due
to the change in ownership that occurred in 1994. UWIN also has recorded a
deferred tax asset or liability for compensation expense in connection with the
issuance of stock options and for allocated earnings or losses of its equity
investments 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
net deferred tax assets:
F-17
<PAGE> 43
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------
2000 ACTIVITY 1999
----------- ----------- -----------
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 3,005,007 $ 564,206 $ 2,440,801
Stock options 153,491 (32,720) 186,211
Equity in allocated earnings and losses of equity investment -- (756,146) 756,146
----------- ----------- -----------
TOTAL DEFERRED TAX ASSETS 3,158,498 (224,660) 3,383,158
DEFERRED TAX LIABILITIES:
Equity in allocated earnings and losses of equity investment (694,086) (694,086) --
----------- ----------- -----------
TOTAL DEFERRED TAX LIABILITIES 2,464,412 (918,746) 3,383,158
Valuation allowance for deferred tax assets (2,464,412) 918,746 (3,383,158)
----------- ----------- -----------
NET DEFERRED TAX ASSETS $ -- $ -- $ --
=========== =========== ===========
</TABLE>
Reconciliations between the statutory Federal income tax expense (benefit) rate
and UWIN's effective income tax (benefit) rate as a percentage of net income
(loss) from continuing operations were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------
2000 1999
----------------------- ----------------------
PERCENT DOLLARS PERCENT DOLLARS
------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Tax expense (benefit) at statutory Federal rate 34% $ 270,889 (34%) $ (564,853)
Permanent differences:
Expired NOL & other 6% 48,406 -- 2,429
Increase due to current year net operating loss 82% 653,850 39% 646,397
Stock options (4%) (32,720) -- --
Recaptured (suspended) losses of IC-BH 64% 509,808 (31%) (509,808)
Equity in allocated (earnings) or losses of IC-BH (182%) (1,450,233) 26% 425,835
------- ----------- ------- ----------
Effective income tax rate -0-% $ -0- -0-% $ -0-
======= =========== ======= ==========
</TABLE>
Due to the availability of net operating loss carryforwards and other net
deferred tax assets there is no provision for current or deferred taxes for the
years ended March 31, 2000 and 1999. Should UWIN have taxable income in future
periods in excess of net deferred tax assets available to offset taxable
earnings, a provision for tax expense will be provided.
NOTE 10. EQUITY, STOCK PLAN AND WARRANTS
During 1999, UWIN established the 1999 Stock Option Plan, (the "Stock
Option Plan"). The Stock Option Plan is discretionary and provides for the
granting of awards, including options for the purchase of UWIN's common stock
and for the issuance of stock appreciation rights, restricted and/or
unrestricted common stock and performance stock awards to directors, officers,
employees
F-18
<PAGE> 44
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
and independent contractors of UWIN and its affiliates. Common stock options and
stock awards granted under the Stock Option Plan expire ten years from the date
of grant and generally vest immediately but are restricted as to exercise for
the first six months subsequent to the date of grant. An aggregate of 1,200,000
shares of common stock have been reserved for grants under the Stock Option
Plan, of which 312,500 shares were available for future grants at March 31,
2000. Shares of common stock awarded as restricted stock are subject to
restrictions on transfer and subject to risk of forfeiture until earned by
continued employment or service or achievement of certain performance
milestones.
Warrants granted during the year ended March 31, 2000 for business
consulting totaled 100,000. Warrants granted during the year ended March 31,
2000 for financing totaled 1,343,902. Options granted for the year ended March
31, 2000 for 1997, 1998, and 1999 director and advisory director compensation
totaled 887,500. All options granted during the year ended March 31, 2000 vest
immediately and are exercisable as of the date granted. There were no options
granted during fiscal 1999.
UWIN has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation expense
has been recorded for the year ended March 31, 2000 in accordance with the
intrinsic value method prescribed in APB No. 25, and related Interpretations of
SFAS No. 123 for equity awards to nonemployees. Information regarding the
options and warrants for 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
OPTIONS WARRANTS
---------- ------------------------
2000 2000 1999
---------- ---------- ----------
<S> <C> <C> <C>
Outstanding, beginning of year -- 823,736 976,990
Granted 887,500 1,443,902 --
Exercised (6,000) (162,000) --
Expired or cancelled -- (116,292) (153,254)
---------- ---------- ----------
Outstanding, end of year 881,500 1,989,346 823,736
---------- ---------- ----------
Exercisable, end of year 881,500 1,609,902 444,292
---------- ---------- ----------
Available for grant, end of year 312,500 -- --
---------- ---------- ----------
</TABLE>
F-19
<PAGE> 45
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
The weighted average option and warrant exercise price information for 2000 and
1999 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
OPTIONS WARRANTS
---------- ------------------------
2000 2000 1999
---------- ---------- ----------
<S> <C> <C> <C>
Outstanding, beginning of year $ -- $2.14 $2.21
Granted during the year $2.06 $2.61 $ --
Exercised during the year $2.06 $1.54 $1.70
Expired or cancelled during the year -- $3.41 $ --
Outstanding at end of year $2.06 $2.38 $2.30
Exercisable at end of year $2.06 $2.37 $2.14
</TABLE>
Significant option and warrant groups outstanding at March 31, 2000, and related
weighted average exercise price and life information is as follows:
<TABLE>
<CAPTION>
OPTIONS WARRANTS EXERCISE REMAINING
GRANT DATE OUTSTANDING OUTSTANDING EXERCISABLE PRICE LIFE (YEARS)
----------------------- ------------------ ------------------- ----------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
April 1996 -- 16,000 16,000 $1.50 0.1
December 1997 -- 100,000 50,000 $2.25 2.8
December 1997 -- 429,444 100,000 $2.36 0.8
June 1999 -- 100,000 100,000 $2.75 2.2
September 1999 -- 30,000 30,000 $2.50 2.6
October 1999 881,500 -- 881,500 $2.06 4.6
October 1999 -- 20,000 20,000 $1.80 2.2
November 1999 -- 150,000 150,000 $1.80 4.7
November 1999 -- 25,000 25,000 $2.50 2.7
December 1999 -- 1,118,902 1,118,902 $2.63 4.8
</TABLE>
The weighted average fair value at date of grant for options granted during 2000
was $1.63 per option. The fair value of options at date of grant was estimated
using the Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
2000
----
<S> <C>
Expected life (years) 4 years
Interest rate 5.7%
Dividend yield --
Forfeiture rate 5%
Volatility 118%
</TABLE>
F-20
<PAGE> 46
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
Had compensation costs for UWIN's stock option plan been determined based on the
fair value at the grant date in 2000 consistent with the provisions of SFAS No.
123, UWIN's net income (loss) and net income (loss) per share would have
decreased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
2000
----
<S> <C>
Net income - as reported $ 796,730
Net loss - pro forma $ (155,673)
Net income per share
(basic and diluted) -- as reported $ 0.06
Net loss per share
(basic and diluted) - pro forma $ (0.02)
</TABLE>
The pro forma impact only takes into account options granted since April 1,
1999. Since all options granted since April 1, 1999 vest immediately, the full
impact of calculating compensation costs, net of tax for stock options under
SFAS No. 123 is reflected in the pro forma net loss and pro forma net loss per
share (basic and diluted) amounts presented above.
In connection with the options outstanding at March 31, 2000, 3,500 shares were
exercised in May 2000 and 4,000 shares were exercised in June 2000.
COMPUTATION OF EARNINGS PER SHARE - The following is presented as a
reconciliation of the numerators and denominators of basic and diluted earnings
per share computations, in accordance with SFAS No. 128.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 2000
-----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------- --------------- ----------
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders $ 626,942 10,018,297 $ 0.06
EFFECT OF DILUTIVE SECURITIES
Common stock options and warrants 239,544 --
------------- --------------- ----------
DILUTED EPS
Income available to common stockholders $ 626,942 10,257,841 $ 0.06
============= =============== ==========
</TABLE>
As discussed in Note 8, UWIN has various convertible debt securities of
which the holders of those debt instruments have the option to convert all or a
portion of principal and accrued interest to common stock of UWIN. In accordance
with SFAS No. 128, the effects of applying the if converted method for the year
ended March 31, 2000 results in these convertible debt securities being
antidilutive.
For the year ended March 31, 1999, the Company reported a net loss,
thus the effects of stock options, warrants and convertible debt securities are
antidilutive.
F-21
<PAGE> 47
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 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) 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 commercial and residential 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 segment profit (loss) income and
expense not allocated to reportable segments.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 2000
-------------------------------------------------------------------------------------
Restaurant Real
Gaming Franchise Mining Estate Other Totals
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ -- $ -- $ 32,000 $ -- $ 61,421 $ 93,421
Segment profit (loss) (365,658) -- (62,133) (481,650) (555,716) (1,465,157)
Segment assets 2,299,076 -- 480,812 2,582,823 -- 5,362,711
Interest expense -- -- 628 225,033 153,090 378,751
Interest income -- -- -- 205,601 41,050 246,651
Equity in income (loss)
of equity investment 2,299,076 (37,189) -- -- -- 2,261,887
</TABLE>
<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>
F-22
<PAGE> 48
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
Reconciliation of reportable segment assets to UWIN's consolidated totals are as
follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------------------------
2000 1999
---------------- ---------------
<S> <C> <C>
Assets
Total assets for reportable segments $ 5,362,711 $ 2,814,814
Cash not allocated to segments 1,489,735 161,234
Notes receivable not allocated to segments 3,027,174 1,306,547
Furniture, fixtures, & equipment not allocated to segments 85,149 93,836
Other assets not allocated to segments 174,401 153,315
--------------- --------------
Total assets $ 10,139,170 $ 4,529,746
=============== ==============
</TABLE>
Reconciliation of reportable segment revenues to UWIN's consolidated totals are
as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------------------------
2000 1999
---------------- ---------------
<S> <C> <C>
Revenue
Total revenue for reportable segments $ 93,421 $ 372,937
Interests income allocated to reportable segments 246,651 81,017
---------------- ---------------
Total revenue $ 340,072 $ 453,954
================ ===============
</TABLE>
NOTE 12. 401(k) PLAN
UWIN has a 401(k) plan, under which employees 21 years of age or older
qualify for participation. Participants are permitted to make contributions to
the plan on a pretax salary reduction basis in accordance with the provisions of
Section 401(k) of the Internal Revenue Code. All such contributions are
immediately vested and nonforfeitable. Under the provisions of the plan, UWIN
may make discretionary matching contributions of 50% of employee contributions
up to 6% of employees' compensation. Employees vest in such contributions at the
end of one year of service. UWIN's discretionary contributions for the years
ended March 31, 2000 and 1999 were $6,996 and $1,860, respectively.
NOTE 13. RELATED PARTY TRANSACTIONS
In the ordinary course of business, UWIN has entered into transactions
with related entities. The majority of these transactions include loans made or
received from related parties. Following is a description of those transactions
during the year ended March 31, 2000, and 1999.
During the fiscal year ended March 31, 2000, UWIN loaned Clay County
Holdings, Inc. ("CCH") $624,762 for working capital purposes. Also during fiscal
2000, CCH purchased, for itself or its assigns, 38,865 shares of UWIN restricted
common stock for cash of $61,923. During the year ended March 31, 1999, GMD
loaned CCH $1,306,547 for working capital purposes. Also during
F-23
<PAGE> 49
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
fiscal 1999, CCH purchased, for itself or its assigns, 219,555 shares of UWIN
restricted common stock for cash of $302,209. In addition, during fiscal year
1999, CCH loaned RCI $600,000 for working capital purposes.
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.
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, 2000 and 1999 total
$312,653 and $142,865, respectively.
NOTE 14. LEGAL PROCEEDINGS
UWIN is not currently engaged in any material litigation that
is not routine or merely incidental to its business.
NOTE 15. SUBSEQUENT EVENTS - WELLESLEY ISLAND
In March 2000 UWIN entered into an agreement to acquire approximately
800 acres on Wellesley Island in New York state. At March 31, 2000 UWIN had
capitalized $185,650 of cost incurred by its wholly-owned subsidiary, Blue
Diamond Resorts, Inc., which was formed to hold and develop the property.
Subsequent to year end the agreement was finalized for a purchase price of
approximately $1,802,000. UWIN is conducting a feasibility study of the real
estate for possible development of a master-planned community.
F-24
<PAGE> 50
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
23.1 Consent of Pannell Kerr Forster of Texas, P.C.
27 Financial Data Schedule
