Date: Fri, 19 Dec 1997 00:07:06 GMT Server: Apache/1.2.4 Last-Modified: Fri, 31 Oct 1997 02:16:37 GMT ETag: "68249-1f5b-34593f85" Content-Length: 8027 Accept-Ranges: bytes Connection: close Content-Type: text/html
August 13th, 1997
To Our Shareholders:
Management has decided to send this letter to the Company's shareholders in an effort to keep you informed of both new and ongoing developments in the company. We believe the contents of this letter will answer questions you may have about the Company's operation.
The Company continues to operate profitably and grow steadily. Shareholder equity has grown from $13,829,000 at July 31, 1996 to $18,212,000 at April 30, 1997 and net income for the nine months ended April 30, 1997 totaled $3,237,000 as compared to $2,797,000 for the same period in 1996. Management's efforts have been focused in five areas of activity - 1) Table Mountain Casino, 2) the Auburn Casino project, 3) the funeral home and cemetery project in North Las Vegas, 4) G&L Acquisition, Inc. and 5) in seeking to develop new opportunities for future growth of the Company.
1. Table Mountain Casino in Fresno, California is performing well and the Tribe is considering plans to expand the facility. The expansion would include additional gaming space, a new (second) restaurant and increased parking availability. Future growth of Casino profitability necessitates that all these areas be addressed in the near future. The Tribe and we believe that an expansion would result in an increased number of patrons, revenues and profits.
2. The United Community of Auburn Indians project in Placer County near Sacramento, California continues to move through the governmental process. The Company and the Tribe continue preplanning activities for the expected Casino development. Although this process has taken longer than originally expected, the demographics and proforma for this project are very favorable, viable and attainable.
Whereas both of the Company's gaming consulting contracts are with Tribes in California, they are affected by the current compacting process between the California Tribes and the State. Presently the Governor of California is meeting with and discussing provisions of a gaming compact (i.e., agreement) with the Pala Tribe of Southern California. This compact could serve as a model for other tribal compacts within the state. We are cautiously optimistic that a tribal state compact will result from these meetings and negotiations. In the meantime, the U.S. Attorney for the Eastern District of California, the district in which Table Mountain Casino is located, has granted the tribes with operating casinos a period of time to convert their video gaming machines into pari-mutuel, player pooled or finite-type, games which better conform to state gaming laws. A pari-mutuel environment by definition is a system of betting where winners receive all the money wagered (bet) on a specific event, less any administrative and maintenance fees for operating the betting system (such as at horse racing tracks). At the time of this letter, the tribes have been granted two extensions; the most recent extension expires on September 30, 1997. The U.S. Attorney has indicated that as long as the tribes remain in good faith negotiations with the State government, he would not take action to stop their video gaming devices.
3. In 1997 the Company acquired forty (40) acres of land in North Las Vegas, Nevada for the construction and operation of a funeral home and cemetery. When completed this will be the first cemetery to open in the Las Vegas area in over twenty-five (25) years. The Las Vegas Valley has experienced a 400% growth rate since that time and, in 1996 was the fastest growing city in the United States.
The Company plans to build a facility, which will set the standard for the death care industry in the Las Vegas area. The property will be aesthetically pleasing and superior in operation. We are now finalizing the architectural and engineering plans for the development of the project. We expect the facility will be operational within twelve to eighteen months. Our consultants contend the property is large enough to have cemetery internments for over 50 years. The Company expects that it will be able to generate revenue through pre-need sales prior to the grand opening of the facility. Accordingly we see this business venture as adding long-term earnings and greater shareholder value to the Company's growth plans.
4. During Fiscal 1997 a 65% subsidiary of the Company, through a private placement, raised approximately $2.5 million to be used for the development or acquisition of a company involved in the leisure and/or gaming industries. Management diligently continues to seek a viable business opportunity which will contribute new revenues and profits to the parent company.
5. As a result of its past success, the Company has accumulated a large cash position. Management is seeking to either acquire or develop additional new business in related industries that would generate additional profitability, add future earnings per share and greater enhance shareholder value.
The last area of concern to shareholders and management is our stock price - disappointing, in light of the Company's steady earnings and strong balance sheet. Management believes that the very low P.E multiple is a direct result of the nature of our core business, Native American Gaming in California, a non-compacted state at the time of this letter.
As previously stated, we are cautiously optimistic that the ongoing meetings between tribal attorneys and tribal leaders with representatives of the State of California will result in a model compact for all California Tribes. This would elevate Tribal government gaming in California to the same platform tribes in other states have enjoyed for years, and remove the "cloud" that has hovered over this industry far too long. The compacting process would lend recognition to these successful Tribal enterprises. And furthermore, garner the attention and respect of the financial community for this small and unique industry.
In parallel with that process, management believes that its diversification plans will prove fruitful both in terms of new areas of revenue and profitability, and also in terms of stock price. By carefully moving into new areas of business and spreading its risk beyond Indian gaming, we anticipate that the Company will not be viewed as one dimensional, our visibility will be heightened, and shares will not be looked upon as a "high risk" purchase.
With all of the above in mind, we look to close Fiscal Year 1997 on a high note and enter Fiscal 1998 with an air of optimism and a firm game plan. We hope this concise update helps you to better understand our company. Please know that we appreciate your past and future support of our Company.
Very truly yours,