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Nevada Gold &
Casinos, Inc. is well positioned for growth in the gaming industry
Resort & Casinos
Nevada Gold & Casinos, Inc.
3040 Post Oak Blvd., Suite 675
Houston, TX 77056
H. Thomas Winn
Chairman and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
July 17, 2006
H. Thomas Winn
Chairman and CEO
H. THOMAS WINN, age 65. Mr. Winn has been our Chairman and CEO since January 1994.
Mr. Winn is responsible for the transition of the Company from a mining business
into a gaming and entertainment business. Since 1983, Mr. Winn has served as President of
Aaminex Capital Corporation, a financial consulting and venture capital firm. Mr. Winn has
formed numerous investment limited partnerships and capital formation ventures that range
from motion pictures to commercial real estate and mining projects. Mr. Winn has been a
director of Samaritan Pharmaceuticals, Inc. since 1999.
Nevada Gold & Casinos, Inc. (AMEX:UWN) of Houston, Texas is a developer, owner and
operator of gaming facilities and lodging and entertainment facilities in Colorado,
California, Oklahoma, and New York. The Company owns a 43% interest in the Isle of
Capri-Black Hawk LLC, which owns Isle of Capri-Black Hawk and Colorado Central Station,
both of which are in Black Hawk, Colorado. Colorado Grande Casino in Cripple Creek, Colorado
is wholly owned and operated by Nevada Gold. The Company owns a 40% interest in the Tioga
Downs Racetrack & Vernon Downs Racetrack in New York State and has a management
contract for both facilities. The Company also works with Native American tribes in a
variety of capacities from the right to lease gaming equipment to development and
management of their gaming properties. Native American projects consist of River Rock
Casino in Sonoma County, California, a casino to be built in Tulsa, Oklahoma for the
Muscogee (Creek) Nation, a casino to be built in Pauma Valley, California for the La Jolla
Band of Luiseņo Indians and a casino to be developed by Buena Vista Development Company,
LLC in the city of Ione, California for Buena Vista Rancheria of Me-Wuk Indians.
CEOCFO: Mr. Winn, will you tell us about your vision when you
started with the company and where you are today?
Mr. Winn: People ask us how we got into the gaming
business; we come from a finance and development background and we ended up owning some
property in a little town called Blackhawk Colorado where gaming was passed in the fall of
1990. It gave us an insight on what was going on as they decided to develop other gaming
properties. We spent three or four years trying to learn the business and assembling what
ultimately became the largest gaming site in the state of Colorado. Blackhawk caters to
the Denver market, which is about 45 minutes away. We ended up doing a joint venture in
1997 with Isle of Capri-Black Hawk LLC., who is our partner. We own 43% of two properties
there now with Isle of Capri as our partner and the operator. We are roughly 28% market
share in a market that has almost thirty casinos. We are clearly the dominant player and
part of that is that we have the largest site and we have the best geographical site
because it is the first thing that you see when you come from Denver. The vision was to
capitalize on an industry that we initially did not know much about, but we developed our
position there from our finance and development skill set. We went on to do that with some
other properties up until about two years ago when we made our transformation into an
operating company. Today we are involved in 9 different gaming projects; 4 of them
contribute to the P&L currently with five new projects coming out in the next 24
months, so we are excited about what we have in our pipeline.
CEOCFO: Why is this the
time to make the change?
Mr. Winn: The change is that we are doing this
transformation into an operating entity. I personally do not come from an operating
background, but from a finance and development background. We went out to seek a chief
operating officer that could bring that talent to us. We recruited Jonathan A. Arnesen who
is our president and chief operating officer and he comes to us with almost 25 years in
the gaming industry. He started at Caesars Tahoe years ago and spent some time with
Tropicana, opened up Taj Mahal Resorts International Hotel for the Trump organization, and
then spent the last six years developing a billion-dollar expansion for Mohegan Sun and
was their senior vice president of resort operations. For those that do not know, Mohegan
Sun is in Connecticut, a Native American project and the largest and most profitable
casino in the country, including all those in Vegas. It is a four million square foot
facility so he comes with a lot of operating background. He in turn, recruited the senior
vice president and chief financial officer from Mohegan Sun, who is now our senior vice
president and chief financial officer. That became our core team of which we have
continued to recruit other people into the organization including our whole operating team
for our two New York properties, one of which just opened up and the other will open up in
CEOCFO: Is it a natural
progression going into the operating area or is there a reason you have chosen to do so
Mr. Winn: You are more in charge of your own destiny if
you are in the operating end of the business. We started out as a minority partner in
Black Hawk project and that has worked very well for us, but as the company grows, we can
continue to have more control of our future growth by being a majority owner vs. a
minority and being an operator vs. the passive partner. It fits into the strategic
decision that was made by our board to grow the company in the operating direction.
CEOCFO: What is
currently in the works?
Mr. Winn: In the operating areas, we have 5 more
projects coming in the next 24 months; one we just opened in the month of June, which is
our TIOGA DOWNS project, and it is in New York State on the Pennsylvania border. We opened
it in June this year (2006) for Racing and on July 4th for the Video Gaming
Machines (VGMs). The reason for the racetrack portion generally these days is either
breakeven or a nominal profit. The reason they are attractive to gaming companies is it is
the next big growth industry of the expansion of gaming. When New York State passed the
law legalizing VGMs, which are the same as the slot machine in the racetracks, then we
immediately started moving forward. We have two properties there in a company called
American Racing & Entertainment, of which we own 40 % and we have a long-term
management agreement. Therefore, we are the manager, operator and 40% owner of those two
properties. One has just come on and the other is under renovation right now, and we will
be opening it up sometime this fall. The other three properties that will come on in the
next two years are Native American projects; one is in Oklahoma and two are in California;
one is in northern California, between Sacramento and Stockton and the other is in the San
CEOCFO: You have a new
service called Strategic Support services for the Native American communities, will you
tell us about that?
Mr. Winn: In the past, Native American tribes
frequently entered into management agreements or development agreements with people and
companies like us. We found that as the Native American industry grows by a huge quantum
leap in five years, the Indian tribes are becoming more capable and they would like to be
in-charge of their own destiny, i.e., operate their own facilities. The concept of doing
support services kind of preserves their ability to stay in control of the project, but
they all know that they need help from the industry so we can bring that expertise to the
table. However, instead of being their manager, we can play more the role of consultant or
mentor where we will help train, do the business and marketing plan, strategic development
facilities, manage the development process everywhere from design to guiding them into the
operating end of the business. The key people will be employees of the tribe vs. employees
of Nevada Gold, and that I think is a win/win situation both for the tribal communities as
well as for ourselves because it allows us to initiate the project sooner, not just for
new projects but another whole market out there. Many Native American projects are in a
monopoly, meaning they are the only one there, so many times they succeed in spite of
themselves and there is a lot of inefficiencies that with proper new strategic operating
systems and good training programs can add a lot of additional bottom line. This can be
done by increasing the top line or decreasing the operating costs, or both. All of the
tribes are interested in doing that and we have been test marketing that for the last 60
days. It has been presented to two or three tribes now and the initial response has been
good because they like the idea of staying in control of their own destiny but knowing
they have, philosophically speaking, a partner they can rely on to make sure that things
CEOCFO: Does having worked with the Native American tribes in
the past, give you a leg-up in your negotiations?
Mr. Winn: Yes, Native Americans, like most people,
operate on trust and trust comes from building relationships. Since we have been working
for five years in the Native American community and we have worked with a number of
tribes, then that word-of-mouth gets out and we meet a lot of our new prospects through
word-of-mouth and references. We will aggressively market this program as well but we get
a lot of our current relationships just through referrals.
CEOCFO: Will you tell us
about the financial position of the company?
Mr. Winn: The company is fine financially for the
projects that we have currently on our plate, meaning the 4 operating projects and the 5
that are coming on. However, we have made it known through a couple of press releases that
we are aggressively looking for acquisition opportunities. If some of those opportunities
came around, then we will need to go back to the debt or equity markets to do some new
financing for acquisitions. We are already working with strategic partners in that vein
now, which are a lot of equity funds that want to be directly involved in this industry,
but they do not necessarily want to be in the operating end of the business. Therefore, we
are lining up a number of strategic partners that could be available and have an interest
in participation and new projects coming down the road and the other is to possibly
monetize some of our existing assets and be able to redeploy those funds into some
outright ownership that we would have direct operating control of.
CEOCFO: What is the
state of the gaming industry today?
Mr. Winn: Overall, it continues to grow. If you look
back twenty years, gaming only existed in the state of Nevada and New Jersey, now there is
some form of gaming in 37 states and it continues to grow into others. For example, we are
based in Texas, which currently has no gaming here, but it does have horse and dog racing.
Therefore, we think that it is just a matter of time that Texas, as well as other states,
will pass gaming probably at their existing facilities like horse tracks. In the state of Pennsylvania
they primarily passed VGMs at horse tracks, although there are a couple of off-track
venues. New York expanded through passing VGMs at their racing facility. We view the next
big wave of expansion, in addition to the Native American expansion, as being the states,
that dont have gaming currently, legalizing VGMs at their tracks.
CEOCFO: Why should
investors want to be involved through Nevada Gold?
Mr. Winn: We think we are a good growth story because
we have a lot of new projects on our plate. We are at that awkward chicken or egg stage
where we are currently recognizing pre-development costs for getting those projects going
and we are not yet recognizing any revenue stream from those five projects. Because of
that and the bad market conditions, our stock has been beat down severely so we think it
is a great opportunity at the price we are today, to be able to get in and ride the growth
of those new projects coming on. For instance, our equity value in our Colorado property
alone, far exceeds the current market cap of the company. I realize there are a lot of
companies that are down now because of market conditions, but I think the fundamental
assets of our company far exceeds the current value. We have a lot of new projects coming
on, so we have both fundamentals and a great growth story in addition to that.
CEOCFO: The investment
community seems to be recognizing you in a fairly positive manner!
Mr. Winn: A number of analysts have recently upgraded
us and we are going to be going on road shows here in the near future with some of those
analysts. We are going to meet some existing funds, and will be talking to new prospects
as well. I think we have a great story to tell, the key is to get out and tell it to more
people. We spend most of our time running the company, not telling the story but
occasionally have to stop and let people know what you are doing, so we are going to spend
some time doing that.
CEOCFO: Any final
thoughts for our listeners and readers?
Mr. Winn: I would say that if you are not familiar with
Nevada Gold & Casinos, Inc. to watch the company. We think it is a great time to get
involved and watch what we do. I think the key will be watching the completion of new
projects as with TIOGA DOWNS. We had a record opening on July 4th (2006), with
the highest revenue that has ever been had by any of the racetracks in New York for a
first day opening. VERNON DOWNS will be opening this fall and the other projects are
coming along as anticipated. Some of the other projects we will be able to announce
in the future. We are excited about where we are with a new management team and a new
strategic move forward and some new projects. We hope we can convey that to other people.
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