Nevada Gold & Casinos (UWN) 10-Q 2014 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended January 31, 2014

¨   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from_______________________ to ___________________________

Commission File Number1-15517

Nevada Gold & Casinos, Inc.

(Exact name of registrant as specified in its charter)

Nevada	88-0142032
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

133 E. Warm Springs Road
Suite 102
Las Vegas, Nevada	89119
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number including area code: (702) 685-1000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files).

x Yes¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer¨ Accelerated filer¨ Non-accelerated filer¨ Smaller Reporting Companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.).   

¨ Yes  x No

The number of common shares, $0.12 par value per share, issued and outstanding, was 16,146,248 as of March 14, 2014. 

 

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – January 31, 2014 (unaudited) and April 30, 2013	2
	Consolidated Statements of Operations – Three and nine months ended January 31, 2014 (unaudited) and January  31, 2013 (unaudited)	3
	Consolidated Statements of Cash Flows –Nine months ended January 31, 2014 (unaudited) and January 31, 2013 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

FORWARD-LOOKING STATEMENTS

Factors that May Affect Future Results

(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

Certain information included in this Form 10-Q and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us or our representatives) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Statements that include the words “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or other words or expressions of similar meaning, may identify forward-looking statements. We have based these forward-looking statements on our current expectations about future events. Forward-looking statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations, intentions with respect to the financial condition, results of operations, future performance and the business of us, including statements relating to our business strategy and our current and future development plans. These statements may also involve other factors which are detailed in the “Risk Factors” and other sections of our Annual Report on Form 10-K for the year ended April 30, 2013 and other filings with the Securities and Exchange Commission.

Although we believe that the assumptions underlying these forward-looking statements are reasonable, any or all of the forward-looking statements in this report and in any other public statements that are made may prove to be incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this report will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this report or other public communications that we might make as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any further disclosures made on related subjects in our subsequent reports filed with the Securities and Exchange Commission should be consulted.

1

Part I. Financial Information

Item 1. Financial Statements

Nevada Gold & Casinos, Inc.

Consolidated Balance Sheets

	January 31,		April 30,
	2014		2013
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,686,817	$	6,723,919
Restricted cash		1,325,924		1,306,487
Accounts receivable, net		367,780		445,481
Prepaid expenses		1,050,304		854,092
Notes receivable, current portion		298,911		216,596
Other current assets		345,724		373,923
Total current assets		9,075,460		9,920,498
Real estate held for sale		1,100,000		1,100,000
Investments in development projects		-		56,959
Notes receivable, net of current portion		1,823,272		2,082,853
Goodwill		16,103,583		16,103,583
Identifiable intangible assets, net of accumulated amortization of $5,317,616     and $4,413,439 at January 31, 2014 and April 30, 2013, respectively		6,055,560		6,959,737
Property and equipment, net of accumulated depreciation of $3,385,318 and     $2,599,940 at January 31, 2014 and April 30, 2013, respectively		4,498,675		5,028,122
Deferred tax asset, net		4,854,853		4,738,373
Other assets		510,222		533,861
Total assets	$	44,021,625	$	46,523,986
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,100,449	$	2,024,465
Accrued interest payable		39,930		34,393
Other accrued liabilities		2,084,632		2,127,140
Long-term debt, current portion		1,600,000		1,280,000
Total current liabilities		4,825,011		5,465,998
Long-term debt, net of current portion		11,150,000		12,930,000
Other long-term liabilities		432,055		421,253
Total liabilities		16,407,066		18,817,251
Stockholders' equity:
Common stock, $0.12 par value per share; 50,000,000 shares authorized; 16,929,085     and 16,864,122 shares issued and 16,146,248 and 16,081,285 shares outstanding at     January 31, 2014, and April 30, 2013, respectively		2,031,499		2,023,705
Additional paid-in capital		24,517,996		24,419,858
Retained earnings		8,002,638		8,200,746
Treasury stock, 782,837 shares at January 31, 2014 and April 30, 2013, respectively,     at cost		(6,932,035)		(6,932,035)
Accumulated other comprehensive loss		(5,539)		(5,539)
Total stockholders' equity		27,614,559		27,706,735
Total liabilities and stockholders' equity	$	44,021,625	$	46,523,986

The accompanying notes are an integral part of these consolidated financial statements.

2

Nevada Gold & Casinos, Inc.

Consolidated Statements of Operations

(unaudited)

	Three Months Ended				Nine Months Ended
	January 31,		January 31,		January 31,		January 31,
	2014		2013		2014		2013
Revenues:
Casino	$	12,810,554	$	14,290,483	$	41,239,008	$	43,741,630
Food and beverage		2,606,048		2,527,607		7,476,123		7,593,374
Other		432,150		436,812		1,295,549		1,364,932
Gross revenues		15,848,752		17,254,902		50,010,680		52,699,936
Less promotional allowances		(1,087,885)		(1,044,757)		(3,194,646)		(3,295,399)
Net revenues		14,760,867		16,210,145		46,816,034		49,404,537
Expenses:
Casino		7,379,668		7,880,140		24,286,561		24,853,463
Food and beverage		1,322,877		1,206,390		3,821,637		3,569,639
Other		62,053		77,591		187,101		233,254
Marketing and administrative		4,017,777		4,121,894		12,419,561		12,557,581
Facility		489,927		592,905		1,460,408		1,706,704
Corporate expense		638,177		850,664		1,840,428		3,256,611
Depreciation and amortization		565,030		550,609		1,692,254		1,628,124
Write-off of investments in development projects		-		-		56,959		257,733
Total operating expenses		14,475,509		15,280,193		45,764,909		48,063,109
Operating income		285,358		929,952		1,051,125		1,341,428
Non-operating income (expenses):
Loss on sale of assets		(7,412)		(2,132)		(15,929)		(5,095)
Interest income		33,241		85,051		101,727		85,951
Interest expense		(255,393)		(370,913)		(954,456)		(1,149,477)
Interest rate swap expense		(3,620)		-		(3,620)		-
Amortization of loan issue costs		(44,305)		(85,119)		(209,885)		(247,744)
Loss on extinguishment of debt		(283,550)		-		(283,550)		-
Income (loss) before income tax benefit (expense)		(275,681)		556,839		(314,588)		25,063
Income tax benefit (expense)		72,643		(368,673)		116,480		(348,987)
Net income (loss) from continuing operations	$	(203,038)	$	188,166	$	(198,108)	$	(323,924)
Net income (loss) from discontinued operations, net of taxes		-		47,190		-		(91,603)
Net income (loss)	$	(203,038)	$	235,356	$	(198,108)	$	(415,527)
Per share information:
Net income (loss) per common share - basic and diluted      for continuing operations	$	(0.01)	$	0.01	$	(0.01)	$	(0.02)
Net income (loss) per common share - basic and diluted      for discontinued operations in fiscal year 2013			$	0.00			$	(0.01)
Basic weighted average number of shares outstanding		16,136,485		16,028,191		16,115,311		15,975,576
Diluted weighted average number of shares      outstanding		16,325,594		16,029,921		16,271,238		15,975,576

 The accompanying notes are an integral part of these consolidated financial statements.

3

 

Nevada Gold & Casinos, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended
	January 31,		January 31,
	2014		2013
Cash flows from operating activities:
Net income(loss)	$	(198,108)	$	(415,527)
Adjustments to reconcile net income(loss) to net cash provided by operating activities:
Depreciation and amortization		1,692,254		1,628,124
Write-off of investments in development projects		56,959		257,733
Stock-based compensation		40,860		124,238
Amortization of deferred loan issuance costs		209,885		247,744
Loss on extinguishment of debt		283,550		-
Deferred rent		18,072		57,101
Loss on sale of assets		15,929		5,095
Changes to restricted cash		(19,437)		353,920
Deferred interest income		11,007		11,889
Deferred income tax benefit		(116,480)		301,797
Changes in operating assets and liabilities:
Receivables and other assets		(86,302)		156,755
Accounts payable and accrued liabilities		(979,263)		361,932
Net cash provided by operating activities		928,926		3,090,801
Cash flows from investing activities:
Capitalized development costs		-		(91,263)
Collections on notes receivable		177,266		28,659
Purchase of property and equipment		(280,132)		(529,020)
Proceeds from the sale of assets		5,574		800,000
Net cash (used in) provided by investing activities		(97,292)		208,376
Cash flows from financing activities:
Employee stock plan purchases		54,422		111,914
Proceeds from credit facilities		14,250,000		1,700,000
Payment of deferred loan costs		(473,808)		(25,000)
Repayment of credit facilities		(15,710,000)		(3,505,324)
Cash proceeds from exercise of stock options		10,650		7,100
Net cash used in financing activities		(1,868,736)		(1,711,310)
Net increase in cash and cash equivalents		(1,037,102)		1,587,867
Cash and cash equivalents at beginning of period		6,723,919		5,200,161
Cash and cash equivalents at end of period	$	5,686,817	$	6,788,028
Supplemental cash flow information:
Cash paid for interest	$	952,799	$	1,171,032
Non-cash investing and financing activities:
Issuance of note receivable to purchasers of wholly-owned subsidiary	$	-	$	2,325,000

The accompanying notes are an integral part of these consolidated financial statements.

4

Nevada Gold & Casinos, Inc.

Notes to Consolidated Financial Statements

Note 1. Basis of Presentation

The interim financial information included herein is unaudited. However, the accompanying consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are necessary to present fairly our Consolidated Balance Sheets at January 31, 2014 and April 30, 2013, Consolidated Statements of Operations for the three and nine months ended January 31, 2014 and January 31, 2013, and Consolidated Statements of Cash Flows for the nine months ended January 31, 2014 and January 31, 2013. Although we believe the disclosures in these financial statements are adequate to make the interim information presented not misleading, certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements for the year ended April 30, 2013 and the notes thereto included in our Annual Report on Form 10-K. The results of operations for the three and nine months ended January 31, 2014 are not necessarily indicative of the results expected for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and disclosure of contingent liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, investments, intangible assets and goodwill, property, plant and equipment, income taxes, employment benefits and contingent liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Certain reclassifications have been made to conform prior year financial information to the current period presentation. Those reclassifications did not impact working capital, total assets, total liabilities, net income, net loss or stockholders’ equity. We have revised certain statement of cash flow amounts for the nine months ended January 31, 2013 from the amounts previously reported in our Form 10-Q quarterly report for the quarterly period ended January 31, 2013.  We corrected the classification of proceeds from credit facilities that we had previously reported as supplemental cash flow information for non-cash financing activities rather than as a direct cash flow provided by financing activities.   The correction increased previously reported net cash provided by financing activities by $1.675 million in the nine months ended January 31, 2013, and it reduced previously reported net cash provided by operating activities by an equal amount since the credit facility proceeds were used to prepay our annual slot machine registration fees in South Dakota.  We also corrected the classification of additions to restricted cash that we had previously reported as cash flow from investing activities rather than as cash flow from operating activities.  Refer to Note 3 for the nature of restricted cash. This correction decreased previously reported net cash provided by investing activities by $353,920 in the nine months ended January 31, 2013, and it increased previously reported net cash provided by operating activities by an equal amount.  We assessed the materiality of the corrections and concluded that the corrections were not material to any of our previously issued financial statements.  The correction did not affect net revenues, operating income, income before income tax, or working capital for any period.

Note 2. Critical Accounting Policies

Revenue Recognition 

We record revenues on the accrual basis as earned.The retail value of food and beverage and other services furnished to guests without charge is included in gross revenue and deducted as promotional allowances. Net revenues do not include the retail amount of food, beverage and other items provided gratuitously to customers. We record the redemption of coupons and points for cash as a reduction of revenue as they are earned. These amounts are included in promotional allowances in the accompanying consolidated statements of operations. The estimated cost of providing such complimentary services included in casino expense in the accompanying consolidated statements of operations was as follows:

	Three Months Ended				Nine Months Ended
	January 31,  2014		January 31,  2013		January 31, 2014		January 31,  2013
Food and beverage	$	767,913	$	823,552	$	2,319,852	$	2,554,183
Other		42,055		33,778		106,545		118,920
Total cost of complimentary services	$	809,968	$	857,330	$	2,426,397	$	2,673,103

5

Fair Value and Concentrations of Credit Risk 

The U. S. generally accepted accounting principles defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date and establishes a three-level valuation hierarchy for disclosure of fair value measurements.The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement.The three levels are as follows:

Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Other inputs that are observable directly or indirectly such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs for which there is little or no market data and which we make our own assumptions about how market participants would price the assets and liabilities.

The following describes the valuation methodologies used by us to measure fair value:

Real estate held for sale is recorded at carrying value and tested for impairment annually, or more frequently, using third party valuations.

Goodwill and indefinite lived intangible assets are recorded at carrying value and tested for impairment annually, or more frequently, using projections of undiscounted future cash flows.

The recorded value of cash, accounts receivable, notes receivable and payable approximate carrying value based on their short termnature. The recorded value of long term debt approximates carrying value as interest rates approximate market rates.

Financial instruments that potentially subject us to concentrations of credit risk are primarily notes receivable, cash and cash equivalents, accounts receivable and payable, and long term debt. As of January 31, 2014 we had three notes receivable, as well as the BVD/BVO receivable, outstanding. Two of these notes were issued in connection with a potential gaming project and one is for the sale of the Colorado Grande Casino. Management performs periodic evaluations of the collectability of these notes. Our cash deposits are held with large, well-known financial institutions, and, at times, such deposits may be in excess of the federally insured limit. The recorded value of cash, accounts receivable and payable, approximate fair value based on their short term nature; the recorded value of long term debt approximates fair value as interest rates approximate current market rates.

New Accounting Pronouncements and Legislation Issued

Since the filing of our Form 10-K for the fiscal year ended April 30, 2013, there are no new accounting standards effective which are material to our financial statements or that are required to be adopted by the Company.

Note 3.   Restricted Cash

As of January 31, 2014 and April 30, 2013, we maintained approximately $1.3 million and $1.3 million, respectively, in restricted cash, which consists of player-supported jackpot funds.Player-supported jackpot is a progressive game of chance directly related to the play or outcome of an authorized non-house-banked card game separately funded by our patrons. Any jackpots hit in these card games are paid from such reserved funds.

Note 4. Notes Receivable and BVD/BVO Receivable

Notes Receivable

6

G Investments, LLC

Upon completion of the sale of the Colorado Grande Casino on May 25, 2012, we recorded a $2.3 million note receivable.This note bears interest at6% per annum through the maturity date ofJune 1, 2017 and is secured with all of the assets of the Colorado Grande Casino, pledge of membership interest in G Investments, LLC (“GI”), and a personal guaranty by GI’s principal.

Principal and interest payments are scheduled to be made as follows:

· No monthly installments of principal and accrued interest shall be due and payable for three months following the sale date of May 25, 2012;

· One monthly installment of principal and accrued interest of $5,000 onSeptember 1, 2012;

· Beginning October 1, 2012, eight monthly installments of principal and accrued interest of $20,000;

· Beginning June 1, 2013, twelve monthly installments of principal and accrued interest of $30,000;

· Beginning June 1, 2014, thirty six monthly installments of principal and accrued interest of $40,000; and

· A final installment of $907,061 which is due on the maturity date of June 1, 2017.

Since the inception of this note we have collected $435,000 which consists of $202,817 of principal plus $232,183 of interest.

Big City Capital, LLC

At January 31, 2014 and April 30, 2013, our balance sheet reflects net notes receivable of $0, net of a $3.2 million valuation allowance, related to the development of gaming/entertainment projects from Big City Capital, LLC (“Big City Capital”).These notes receivable have a maturity date ofDecember 31, 2014.On an annual basis, we review each of our notes receivable to evaluate whether collection is still probable. During prior fiscal years we determined that our ability to collect these notes receivable and related accrued interest had been impaired. As a result, given the prevailing very challenging capital market conditions and continued uncertainties as to the economy, and based upon our “Level 3” analysis, we recorded $3.2 million of valuation allowances and wrote off the accrued interest.

BVD/BVO Receivable

At January 31, 2014 and April 30, 2013, our balance sheet reflects a net receivable of $0, net of a $4.6 million valuation allowance, related to the development of gaming/entertainment projects from B. V. Oro, LLC (“BVO”). On an annual basis, we review each of our receivables to evaluate whether collection is still probable. During a prior fiscal year we determined that our ability to collect this receivable and related accrued interest had been impaired. As a result, given the prevailing very challenging capital market conditions and continued uncertainties as to the economy, and based upon our “Level 3” analysis, we recorded a $4.6 million valuation allowance for the total principal and interest due.

Note 5. Long-Term Debt 

Our long-term financing obligations are as follows:

	January 31,		April 30,
	2014		2013
$12.75 million reducing revolving credit agreement, LIBOR plus an Applicable Margin, increasing quarterly payments beginning March 31, 2014 through September 30, 2018, and the remaining $4,250,000 principal due on the maturity date of December 10, 2018	$	12,750,000	$	-
$11.0 million note payable, LIBOR, with 0.25% floor, plus 9.50% interest, payments of $250,000 due each quarter and remainder due at maturity of October 7, 2014		-		9,500,000
$4.0 million promissory note, 11.5% interest until maturity at June 30, 2015		-		3,055,000
$250,000 note payable, 6% interest, to be paid in two annual installments of $100,000 plus accrued interest and the final payment of $50,000 plus accured interest at the maturity date of December 15, 2013		-		50,000
$100,000 note payable, 6% imputed interest, to be paid in thirty equal monthly installments, beginning August 5, 2011, maturing January 13, 2014		-		30,000
$1.4 million promissory note, 6% interest, payable in fifty nine monthly installments of $10,000 plus all accrued interest beginning February 27, 2012, and the remaining principal at the maturity date of January 27, 2017		-		1,275,000
$400,000 note payable, 6% imputed interest, to be paid in sixty equal monthly installments beginning February 27, 2012, maturing January 27, 2017		-		300,000
Total		12,750,000		14,210,000
Less: current portion		(1,600,000)		(1,280,000)
Total long-term financing obligations	$	11,150,000	$	12,930,000

7

On December 18, 2013, the Company and certain of its subsidiaries entered into a new $12,750,000 Reducing Revolving Credit Agreement with Mutual of Omaha Bank (the “Credit Facility”).  The Credit Facility and $1,170,000 of the Company’s cash were utilized to pay off all of the Company’s outstanding long term debt obligations.The maturity date of the Credit Facility is December 10, 2018, and is secured by liens on substantially all of the real and personal property of the Company and its subsidiaries. The interest rate on the borrowing is based onLIBOR plus an Applicable Margin, which will be determined quarterly, based on the total leverage ratio for the trailing twelve month period.The initial Applicable Margin is5.00% until July 1, 2014, when the first quarterly pricing change will take effect.In addition, the Company is required to fix the interest rate on at least 50% of the borrowing through a swap agreement.

As of January 31, 2014, scheduled principal payments on the Credit Facility for each of the next five years and thereafter are as follows:

February 1, 2014 – January 31, 2015	$	1,600,000
February 1, 2015 – January 31, 2016	$	1,700,000
February 1, 2016 – January 31, 2017	$	1,800,000
February 1, 2017 – January 31, 2018	$	1,900,000
February 1, 2018 – December 10, 2018	$	5,750,000

The Credit Facility contains customary covenants for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of the Company’s assets and covenants restricting our ability to merge, transfer ownership, incur additional indebtedness, encumber assets and make certain investments.  The Credit Facility also contains covenants requiring the Company to maintain certain financial ratios commencing as of the fiscal quarter ending April 30, 2014, such as a minimum total leverage ratio ranging from3.00 to1.00 through July 31, 2015, 2.50 to1.00 from August 1, 2015 through January 31, 2017, and 2.00 to1.00 from February 1, 2017 until maturity; and lease adjusted fixed charge coverage ratio no less than 1.15 to1.00.

The Company evaluated the refinancing transaction in accordance with the accounting standards for debt modifications and extinguishments and evaluated the refinancing transaction on a lender by lender basis. As a result of this evaluation, the Company concluded the refinancing was an extinguishment of debt and recognized a loss on debt extinguishment of $283,550 representing the write-off of unamortized debt issuance costs as of the date of the refinancing. In connection with the refinancing transaction, the Company paid $449,000 in fees and other costs which have been capitalized and included in other assets on the consolidated balance sheet.

On June 26, 2013, we obtained a $1.5 million revolving loan from Wells Fargo Gaming Capital, LLC to pay a slot machine registration fee due to the South Dakota Commission on Gaming by June 30 of each year.The loan was repaid on December 18, 2013 as part of the Company’s refinancing transaction. The loan was to mature onMarch 31, 2014 and had an annual interest rate of the base rate, which equals the greater of (a)2.5%, (b) the Federal Reserve rate plus 1/2%, (c) the LIBOR plus1% or (d) the prime rate charged by Well Fargo Bank, N.A., plus the margin rate of3.5%.The terms of the loan required South Dakota Gold to make amortization payments in order to reduce a large portion of the principal balance through October 31, 2013.The repayment of the loan was secured by the assets of South Dakota Gold and NG South Dakota, LLC, while we and NG South Dakota, LLC served as the guarantors.With this loan, we incurred $25,000 of deferred loan issue costs of which the remaining balance was written-off as a result of the Company’s refinancing transaction.

On May 31, 2012, following the closing of the sale of the Colorado Grande Casino we repaid $800,000 of the $4 million note due onJune 30, 2015 from the cash proceeds of the sale price paid to us at closing.Pursuant to the terms of the $4 million loan agreement, we were required to remit all principal and interest payments received pursuant to the $2.3 million note receivable issued to us by the buyer of the Colorado Grande Casino towards further reduction of the principal of the $4 million note. The loan was repaid on December 18, 2013 as part of the Company’s refinancing transaction.

Note 6.Interest Rate Swap

We are required by the Credit Facility to have a secured interest rate swap for at least50% of the remaining Credit Facility principal balance. The Company has an approved interest rate swap policy which establishes guidelines for the use and management of interest rate swaps to either reduce the cost or hedge existing or planned debt. The policy states that the Company shall not enter into swap transactions for speculative purposes. At the inception of any hedge agreement, as required by ASC 815,Derivatives and Hedging, the Company documented the hedging relationship and the risk management objective and strategy for the undertaking of all qualifying hedges.

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On January 17, 2014, the Company entered into a swap transaction with Mutual of Omaha Bank (“MOOB”), which has a calculation period as of the tenth day of each month beginning with February 10, 2014 until the maturity date of the Credit Facility. As of January 31, 2014, the Company had one outstanding interest rate swap with MOOB with a notional amount of $6,375,000 at a swap rate of1.52%, which as of January 31, 2014, effectively converts $6,375,000 of our floating-rate debt to a synthetic fixed rate of6.18%. Under the terms of the swap agreement, the Company pays a fixed rate of 1.52% and receives variable rate based on one-month LIBOR as of the first day of each floating-rate calculation period. Under the terms of the International Swap Dealers Association, Inc. Confirmation, the initial floating index was set at0.157%.

The Company will not designate the interest rate swap as a cash flow hedge and the interest rate swap will not qualify for hedge accounting under ASC Topic 815. Changes in our interest rate swap fair value will be recorded in our Consolidated Statements of Operations.

As required by ASC 815, on a quarterly basis, the Company will assess whether any changes to the hedge instrument, or underlying debt agreement, have occurred which would alter the original designation of the hedge instrument. Each quarter, the Company receives fair value statements from the counterparty, MOOB. The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. To comply with the provisions of ASC Topic 820,Fair Value Measurements and Disclosures, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. As a result of our evaluation of our interest rate swap as of January 31, 2014, we did not record any changes in our interest rate swap fair value for the three or nine months ended January 31, 2014.

Note 7.Income Taxes

For the three months ended January 31, 2014 and 2013, our overall effective income tax rates were 24.6% and 57.7%, respectively. For the nine month periods ended January 31, 2014 and 2013, our overall effective income tax rates were 25.2% and 265.4%, respectively. The decrease in the year-to-date effective tax rate as of January 31, 2014 as compared to the same period of the prior year is primarily due to an increase in the FICA tip credit during 2014.

We have analyzed our filing position in each jurisdiction where we are required to file tax returns.We believe our income tax filing position and deductions will be sustained on audit and we do not anticipate any adjustments that will result in a material change to our financial position.

We filed income tax returns in the United States federal jurisdiction and in several state jurisdictions.No jurisdiction is currently examining our tax filings for any tax years.

Note 8. Stock-Based Compensation

Information about our share-based plans

We have obligations under two employee stock plans: (1) the 2009 Equity Incentive Plan (the “2009 Plan”), and (2) the 2010 Employee Stock Purchase Plan, as amended (the “2010 Plan”).

The 2009 Plan

On April 14, 2009, our shareholders approved the 2009 Plan providing for the granting of awards to our directors, officers, employees and independent contractors.The number of common stock shares reserved for issuance under the 2009 Plan is1,750,000 shares.The plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors. The Committee has complete discretion under the plan regarding the vesting and service requirements, exercise price and other conditions. Under the 2009 Plan, the Committee is authorized to grant the following types of awards:

⋅ Stock Options including Incentive Stock Options (“ISO”),

⋅ Options not intended to qualify as ISOs,

⋅ Stock Appreciation Rights, and

⋅ Restricted Stock Grants.

To date, the Committee has only awarded stock options for stock-based compensation. Our practice has been to issue new or treasury shares upon the exercise of stock options. Stock option rights granted under the 2009 Plan generally have5 or10 year terms and vest in two or three equal annual installments, with some options grants providing for immediate vesting for a portion of the grant.

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A summary of activity under our share-based payment plans for the nine months ended January 31, 2014 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual
	Shares	Price		Term
Outstanding at April 30, 2013	865,000	$	1.08
Granted	-		-
Exercised	(15,000)		0.71
Forfeited or expired	-		-
Outstanding at January 31, 2014	850,000	$	1.09	7.3
Exercisable at January 31, 2014	783,333	$	1.11	7.2

As of January 31, 2014, there was a total of $54,479 of unamortized compensation related to stock options, which cost is expected to be recognized over the next four quarters.

Compensation cost for stock options granted will be based on the fair value of each award, measured by applying the Black-Scholes model on the date of grant and using the weighted-average assumptions of (i) expected volatility, (ii) expected term, (iii) expected dividend yield, (iv) risk-free interest rate and (v) forfeiture rate. Expected volatility is based on historical volatility of our stock. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award.

The 2010 Plan

On October 11, 2010, our shareholders approved the 2010 Plan which permits all our eligible employees, including employees of certain of our subsidiaries, to purchase shares of our common stock through payroll deductions at a purchase price not to be less than90% of the fair market value of the shares on each purchase date.The number of shares available for issuance under the 2010 Plan is a total of500,000 shares.  On November 30, 2010, our Board of Directors amended the 2010 Plan, effective December 1, 2010, to allow its participants to contribute up to a maximum of twenty (20%) percent of their paid compensation.The 2010 Plan became available for employee participation on January 1, 2011, employee payroll deductions began in January of 2011, and shares are to be purchased at the end of each calendar quarter.As of January 31, 2014,343,102 shares were issued to140 participants under the 2010 Plan.

Note 9. 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:

	Three Months Ended				Nine Months Ended
	January 31,		January 31,		January 31,		January 31,
	2014		2013		2014		2013
Numerator:
Basic and Diluted:
Net income (loss) from continuing operations available to common shareholders	$	(203,038)	$	188,166	$	(198,108)	$	(323,924)
Denominator:
Basic weighted average number of common shares outstanding		16,136,485		16,028,191		16,115,311		15,975,576
Dilutive effect of common stock options and warrants		189,109		1,730		155,927		—
Diluted weighted average number of common shares outstanding		16,325,594		16,029,921		16,271,238		15,975,576
Income (loss) per share from continuing operations:
Net income (loss) per common share - basic and diluted for continuing operations	$	(0.01)	$	0.01	$	(0.01)	$	(0.02)
Net income (loss) per common share - basic and diluted for discontinued operations in fiscal year 2013			$	-			$	(0.01)

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For the three months ended January 31, 2014 and January 31, 2013, potential dilutive common shares issuable under options of660,900 and953,300, respectively, were not included in the calculation of diluted earnings per share as they were anti-dilutive. For the nine months ended January 31, 2014 and January 31, 2013, potential dilutive common shares issuable under options of694,000 and955,000, respectively, were not included in the calculation of diluted earnings per share as they were anti-dilutive.

Note 10. Segment Reporting 

We havethree business segments (i) Washington Gold, (ii) South Dakota Gold, (iii) Corporate and for reporting purposes we includeassets of operations held for sale. For the three and nine month periods ended January 31, 2014 and January 31, 2013, the Washington Gold segment consists of the Washington mini-casinos, the South Dakota Gold segment consists of our slot route operation in South Dakota, the Corporate column includes the vacant land in Colorado and its taxes and maintenance expenses, while the “assets of operations held for sale” consists of the Colorado Grande Casino.

Summarized financial information for our reportable segments is shown in the following table. The “Corporate” column includes corporate-related items, results of insignificant operations, and segment profit (loss) and income and expenses not allocated to other reportable segments.

	As of and for the Three Months Ended  January 31, 2014
	Washington Gold		South Dakota Gold		Corporate		Total Continuing Operations		Discontinued Operations		Totals
Net revenue	$	13,265,970	$	1,492,819	$	2,078	$	14,760,867	$	-	$	14,760,867
Casino and food and beverage expense		7,281,343		1,421,202		-		8,702,545		-		8,702,545
Marketing and administrative expense		3,936,401		81,376		-		4,017,777		-		4,017,777
Facility and other expenses		520,021		30,883		639,253		1,190,157		-		1,190,157
Depreciation and amortization		392,807		170,345		1,878		565,030		-		565,030
Segment operating income (loss)		1,135,398		(210,987)		(639,053)		285,358		-		285,358
Segment assets		12,341,375		2,041,298		17,771,357		32,154,030		-		32,154,030
Additions to property and equipment		37,283		6,480		14,022		57,785		-		57,785

	As of and for the Three Months Ended January 31, 2013
	Washington Gold			South Dakota Gold	Corporate		Total Continuing Operations		Discontinued Operations		Totals
Net revenue	$	14,425,957	$	1,784,188	$	-	$	16,210,145	$	-	$	16,210,145
Casino and food and beverage expense		7,399,762		1,686,768		-		9,086,530		-		9,086,530
Marketing and administrative expense		4,061,501		60,393		-		4,121,894		-		4,121,894
Facility and other expenses		622,226		42,178		856,756		1,521,160		-		1,521,160
Depreciation and amortization		383,365		165,455		1,789		550,609		-		550,609
Segment operating income (loss)		1,959,103		(170,606)		(858,545)		929,952		47,190		977,142
Segment assets		21,089,628		4,164,718		9,229,330		34,483,676		-		34,483,676
Additions to property and equipment		80,566		200,977		-		281,543		-		281,543

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	As of and for the Nine Months Ended  January 31, 2014
	Washington Gold		South Dakota Gold		Corporate		Total Continuing Operations		Discontinued Operations		Totals
Net revenue	$	39,533,582	$	7,275,382	$	7,070	$	46,816,034	$	-	$	46,816,034
Casino and food and beverage expense		21,850,051		6,258,147		-		28,108,198		-		28,108,198
Marketing and administrative expense		12,184,758		234,803		-		12,419,561		-		12,419,561
Facility and other expenses		1,540,676		94,699		1,909,521		3,544,896		-		3,544,896
Depreciation and amortization		1,177,552		510,516		4,186		1,692,254		-		1,692,254
Segment operating income (loss)		2,780,545		177,217		(1,906,637)		1,051,125		-		1,051,125
Segment assets		12,341,375		2,041,298		17,771,357		32,154,030		-		32,154,030
Additions to property and equipment		152,632		66,290		14,022		232,944				232,944

	As of and for the Nine Months Ended January 31, 2013
	Washington Gold		South Dakota Gold		Corporate		Total Continuing Operations		Discontinued Operations		Totals
Net revenue	$	41,326,576	$	8,077,961	$	-	$	49,404,537	$	-	$	49,404,537
Casino and food and beverage expense		21,580,113		6,842,989		-		28,423,102		-		28,423,102
Marketing and administrative expense		12,367,775		189,806		-		12,557,581		-		12,557,581
Facility and other expenses		1,829,063		97,108		3,528,131		5,454,302		91,603		5,545,905
Depreciation and amortization		1,145,700		472,469		9,955		1,628,124		-		1,628,124
Segment operating income (loss)		4,403,925		475,589		(3,538,086)		1,341,428		(91,603)		1,249,825
Segment assets		21,089,628		4,164,718		9,229,330		34,483,676		-		34,483,676
Additions to property and equipment		243,509		248,216		-		491,725		-		491,725

Reconciliation of reportable segment assets to our consolidated totals is as follows:

	January 31, 2014
Total assets for reportable segments	$	32,154,030
Cash and restricted cash not allocated to segments		7,012,742
Deferred tax asset		4,854,853
Total assets	$	44,021,625

Note 11.   Other Assets

Other assets consist of the following:

	January 31, 2014		April 30, 2013
Other assets	$	76,374	$	93,553
Deferred loan issue cost, net		433,848		440,307
Other assets	$	510,222	$	533,861

Note 12. Commitments and Contingencies 

We currently lease 3,131 square feet of office space for our corporate headquarters in Las Vegas, Nevada. The lease expires onJanuary 15, 2015. The total annual rent, including mandatory common area maintenance (“CAM”) for this space is currently $49,407. The CAM contractually increases five percent effective each January 1.

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As a result of acquiring facilities in Washington, we own the buildings for the Crazy Moose Casino in Pasco and Coyote Bob Casino’sin Kennewick. In addition we have real property leases as follows:

· Crazy Moose Casino in Mountlake Terrace has a building lease which expires onMay 31, 2014 with an option to renew fortwo additional terms oftwo years andfive years, respectively.The annual rent for this lease is $157,000.

· Crazy Moose Casino in Pasco has a parking lot lease which expired onDecember 31, 2013.Effective January 1, 2014 the parking lot is leased on a monthly basis.

· Silver Dollar Casino in SeaTac has a building lease which expires in May of 2022 with an option to renew for an additional term of10 years.The annual rent is $238,000, with escalation of4% annually.

· Silver Dollar Casino in Renton has a building lease which expires in April of 2019 with an option to renew for up totwo additional terms of10 years each.The annual rent is $517,000, with escalation of8% every three years.

· Silver Dollar Casino in Bothell has a building lease which expires in April of 2017 with an option to renew for an additional term of5 years.The annual rent is $286,000.

· Club Hollywood Casino in Shoreline has casino building and parking lot leases which expire in March of 2017 with options to renew for up tofour additionalfive-year terms.The annual rentals are $700,000, with escalation of3% annually.

· Golden Nugget Casino in Tukwila has a building lease which expires in November of 2014 with an option to renew for an additional term of10 years.The annual rent is $166,000, with escalation of3% annually.

· Royal Casino in Everett has a building lease which expires in January of 2016 with an option to renew for up tofour additionalfive-year terms.The annual rent is $360,600, with escalation of3% annually.

· Administrative offices lease in Renton expires in October of 2018.Themonthly rent for the first 22 months is $4,100 and then $4,250 for months 23-34; $4,425 for months 35-48 and; $4,595 for months 49-58.

· Red Dragon Casino in Mountlake Terrace has a building lease which expires in October of 2016 with an option to renew for up totwo additionalfive-year terms.The annual rent is $384,000, with escalation of2% annually.

South Dakota Gold.As a result of acquiring the South Dakota Gold slot route operation, we have the following real property lease:

· An administrative center lease which expires in January of 2017 with an option to renew for an additionalfive-year term.The annual rent is $55,200.

The expected remaining future rolling twelve months minimum lease payments as of January 31, 2014 are as follows:

Period	Corporate Office Lease Payment		South Dakota Gold Payment		Washington Gold Lease Payment		Total Lease Payment
Feb 2014 - Jan 2015	$	49,454	$	55,200	$	2,884,316	$	2,988,970
Feb 2015 - Jan 2016		—		55,200		2,776,667		2,831,867
Feb 2016 - Jan 2017		—		55,200		2,576,438		2,631,638
Feb 2017 - Jan 2018		—		—		1,059,540		1,059,540
Feb 2018 - Jan 2019		—		—		930,155		930,155
Thereafter		—		—		1,309,292		1,309,292
Total	$	49,454	$	165,600	$	11,536,408	$	11,751,462

On November 23, 2011, we signed an agreement to sell substantially all of the assets of the Colorado Grande Casino, located in Cripple Creek, Colorado, including any rights in the Colorado Grande name and gaming-related liabilities, to G Investments, LLC (“GI”). Prior to the sale to GI, we leased this property at an annual rent of the greater of $144,000 or5% of Colorado Grande Casino’s adjusted gross gaming revenues with an annual cap of $400,000. Starting from April 30, 2012, the annual rent was changed to $252,548 with an option by the landlord to revert to the original rent structure upon obtaining necessary approvals from the Colorado Gaming Commission. Although this lease was assigned to GI as a result of the sale of the Colorado Grande Casino, which occurred on May 25, 2012, we retained contingent liability of the tenant’s obligations under this lease through May 24, 2017. We have evaluated financial information provided by GI as of January 31, 2014, and have not recorded an accrual for contingent liability since it appears unlikely that GI will default on their lease obligation.

We continue to pursue additional development opportunities that may require, individually and in the aggregate, significant commitments of capital, extensions of credit, up-front payments to third parties and guarantees by us for third-party debt.

We indemnify our officers and directors for certain events or occurrences while the director or officer is or was serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification obligations is unlimited; however, we have a directors and officers liability insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid, provided that such insurance policy provides coverage.

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Note 13.   Legal Proceedings

We are not currently involved in any material legal proceedings.

Note 14.   Acquisitions

South Dakota Gold

On January 27, 2012, through our wholly owned subsidiary, NG South Dakota, LLC, we completed the acquisition of100% of the shares of South Dakota Gold for $5.1 million. The transaction was financed by $3.2 million in cash, $25,000 in our common stock, and $1.9 million in three promissory notes payable to the sellers, Michael J. Trucano and Patricia Burns.The first promissory note, in the principal amount of $1,425,000, was scheduled to mature onJanuary 27, 2017 and had an annual interest rate of6% per annum.StartingFebruary 27, 2012, this note was repaid in monthly principal installments of $10,000, plus all accrued and unpaid interest. The remaining balance of this note was repaid on December 18, 2013 as part of the Company’s refinancing transaction (see Note 5).The second promissory note, in the principal amount of $400,000, had an imputed annual interest of6% per annum, was scheduled to mature on January 27, 2017, and was repaid in monthly installments of $6,667 on the twenty-seventh day of each month through November 27, 2013. The remaining balance of this note was repaid on December 18, 2013 as part of the Company’s refinancing transaction (see Note 5). The third promissory note, in the principal amount of $60,324, had an imputed annual interest of6% per annum and matured, and was repaid, onJanuary 27, 2013. We acquired this slot route in furtherance of our strategy of being an owner and operator of gaming facilities. The purchase was accounted for as a purchase business combination in accordance with ASC 805,Business Combinations(“ASC 805”). Goodwill is defined in ASC 805 as the future economic benefits of other assets acquired in a business combination that are not individually identified and separately recognized.Goodwill is attributable to the synergies from the existing customer base, as well as other intangible assets that do not qualify for separate recognition.During fiscal year 2012, closing costs and pre-opening expenses of $1,000 related to the acquisition were included in the consolidated statement of operations in marketing and administrative, legal and other expenses of $108,000 related to the acquisition were reflected separately in the consolidated statement of operations.The summary of the purchase price allocation is as follows:

	(000’s)
Current assets and liabilities, net	$	65
Property and equipment		1,775
Non-compete		251
Customer relationships		1,100
Goodwill		1,936
Purchase price	$	5,127

We reviewed the South Dakota Gold operating results and concluded that pro-forma financial statements were not required due toimmateriality.

Note 15.   Goodwill and Intangible Assets

In connection with our acquisitions of the Washington mini-casinos on May 12, 2009, July 23, 2010, and July 18, 2011 as well as South Dakota Gold on January 27, 2012 (see Note 13), and expenditures made to obtain our Nevada gaming license, as of January 31, 2014, we have goodwill and intangible assets of $22.2 million, net of amortization.

The change in the carrying amount of goodwill and intangibles assets for the nine months ended January 31, 2014 are as follows (in thousands):

					Other
	Total		Goodwill		Intangibles, net
Balance as of April 30, 2013	$	23,063	$	16,104	$	6,959
Current year amortization		(904)		-		(904)
Balance as of January 31, 2014	$	22,159	$	16,104	$	6,055

Goodwill and net other intangibles by segment as of January 31, 2014 are as follows:

					Other
	Total		Goodwill		Intangibles, net
Washington Gold	$	18,956	$	14,167	$	4,789
South Dakota Gold		2,815		1,937		878
Corporate		388		-		388
Balance as of January 31, 2014	$	22,159	$	16,104	$	6,055

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Intangible assets are generally amortized on a straight line basis over the useful lives of the assets.Amortization of intangible assets by category, as of January 31, 2014, is as follows (in thousands):

	Gross
	Carrying		Accumulated
	Amount		Amortization		Net
Customer relationships	$	7,853	$	(4,134)	$	3,719
Gaming license		388		-		388
Non-compete agreements		1,269		(1,183)		86
Trade names		1,862		-		1,862
Total	$	11,372	$	(5,317)	$	6,055

The estimated future annual amortization of intangible assets, which excludes Trade Names and Gaming License, is as follows (in thousands):

Period		Amount
Feb 1, 2014-Jan 31, 2015	$	1,198
Feb 1, 2015-Jan 31, 2016		1,122
Feb 1, 2016-Jan 31, 2017		840
Feb 1, 2017-Jan 31, 2018		458
Feb 1, 2018-Jan 31, 2019		187
Thereafter		—
Total	$	3,805

The expected average useful lives of acquired intangibles related to customer relationships and non-compete agreements are7.0 years and3.0 years, respectively.  The weighted average useful life of intangible assets in total is5.5 years.

Note 16.   State Gaming Laws

Washington

The gaming legislation in Washington State is codified in chapter 9.46 of the Revised Code of Washington (“RCW”) which stipulates the Washington State Gambling Commission (the “WA Gambling Commission”) to be the regulator of gambling activities in this state.  The WA Gambling Commission enforces its authority through an extensive set of rules and regulations promulgated in Title 230 of the Washington Administrative Code.  The state of Washington allows certain gambling activities, such as amusement games, bingo, raffles, punch boards, pull-tabs, card-rooms, and public card games.  In order to be considered legal, these activities must be operated by either non-profit organizations or by commercial food and drink establishments.  Some activities may be operated solely by non-profit organizations, such as raffles.  Some traditional casino games, such as craps, roulette and keno, are prohibited.  House-banked card-rooms have been authorized in Washington State since 1997 and, under current law, each establishment is allowed to have up to 15 tables offering games, such as Blackjack, Ultimate Texas Hold’em, Three Card Poker, Four Card Poker, Spanish Poker, Texas Shootout, Spanish 21, Pai Gow Poker, and others.  The law allows both player-sponsored and house-banked card-rooms. As of January 1, 2009, the WA Gambling Commission increased the maximum bet for house-banked card-rooms’ table game wager limit to $300 and allowed card-rooms to offer Mini-Baccarat. In addition, these establishments are allowed to be open 24 hours per day, provided they close for at least four continuous hours two times per week.  

To operate our ten “mini-casinos” in Washington State, each of them is required to maintain a Public Card-room and Punch Board/Pull-Tab Commercial Stimulant license.  These licenses are renewable annually, subject to continued compliance with applicable gaming regulations.  In addition, the WA Gambling Commission requires, prior to the licenses being issued, each substantial interest holder in the licensees (including our officers, directors and owners of 5% percent or more of any class of our stock) to submit to the WA Gambling Commission certain disclosure forms and be subject to background investigations.  The failure or inability of our “mini-casinos” to maintain their respective licenses would have a material adverse effect on our operations.

15

Revised Code of Washington (“RCW”) 9.46.110 allows local governments (including cities, counties and towns) to prohibit any or all gambling activities for which licenses are required as well as tax such activities.  The maximum tax limitations imposed by law include 20% of gross receipts for public card-room games and either 5% of gross receipts or 10% of net receipt (as chosen by a local authority) for pull-tabs activities.  The current gaming tax rate for public card-room games in the cities of Pasco, Mountlake Terrace, Kennewick, SeaTac, Renton, Tukwila and Shoreline, as well as in Snohomish County, is 10% of table games gross receipts.  The current gaming tax rate for pull-tabs in the city of Kennewick is 10% of pull-tabs net receipts, while in the cities of Pasco, Mountlake Terrace, SeaTac, Renton, Tukwila and Shoreline, as well as in Snohomish County, the tax rate is 5% of pull-tabs gross receipts.  In addition, Washington State charges a business and occupational tax in the amount of 1.63% of all gaming activities’ net receipts in order to promote responsible gaming.  

South Dakota

Gaming in South Dakota began in November 1989 and is presently authorized within the City of Deadwood.The gaming legislation is codified in Chapter 42-7B of the South Dakota Codified Laws as well as Article 20:18 of the South Dakota Legislature Administrative Rules (collectively, the “SD Regulations”) and is regulated by the South Dakota Commission on Gaming (the “SD Gaming Commission”).The SD Regulations allow gambling activities to be conducted at bars and taverns, including slot machines and limited card games, such as Blackjack and Poker. The SD Regulations limit each licensed location to have a maximum of30 slot machines.  The current tax rate is9% of the adjusted gross gaming revenues in addition to an annual fee of $2,000 for each licensed gaming device located in a licensed location.  In order to operate our slot route business in this state, we are required to hold Operator and Route Operator licenses issued by the SD Gaming Commission.    

The SD Regulations require that every officer and director, as well as any stockholder holding5% or greater ownership in a company involved with the conduct of gaming in the state to be a person of good moral character and must submit to a full background investigation conducted by the SD Gaming Commission. Our gaming licenses may be suspended or revoked for any cause which may have prevented their issuance, or for violation by us, or any of our officers, directors, agents, members or employees, of the SD Regulations or for conviction of a crime of moral turpitude or a felony.In addition to the revocation or suspension or in lieu of revocation or suspension, the SD Gaming Commission may impose a reprimand or a monetary penalty.

Colorado

Upon the sale of the Colorado Grande Casino to G Investments, LLC on May 25, 2012, we surrendered our license to operate the Colorado Grande Casino and are no longer subject to the provisions of the Act and the regulations promulgated thereunder.

Nevada

Upon the recommendation of the Nevada Gaming Control Board (the “NV Gaming Board”), on January 26, 2012, the Nevada Gaming Commission (the “NV Gaming Commission” and, collectively with the NV Gaming Board, the “NV Gaming Authorities”) approved our application for registration as a publicly-traded corporation submitted in connection with an acquisition of a1% interest in The Nugget, a non-restricted gaming licensee located in Reno, NV, by our wholly-owned subsidiary, Nevada Gold Speedway, LLC (“NG Speedway”).Our acquisition of equity in the Nugget required us to file the application. In connection therewith, we, NG Speedway, and certain of our key employees and directors were found suitable by the NV Gaming Authorities.We took this action to accelerate future Nevada acquisitions or management contracts.In May 2013, as permitted by the agreement, the Heaney Trust exercised its right to repurchase our1% ownership of The Nugget for $1,000.As a result we were licensed in Nevada and remain registered with the Nevada Gaming Control Board as a publicly traded corporation that has been found suitable.

The ownership and operation of gaming establishments in the State of Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the “NGCA”).A finding of suitability is comparable to licensing and it requires submission of detailed personal and financial information followed by a thorough investigation.A finding of unsuitability with respect to any officer, director, employee, associate, lender or beneficial owner of a licensee or applicant may jeopardize an already issued license or applicant’s license application.Licenses may be conditioned upon termination of any relationship with unsuitable persons.

Althoughany beneficial holder of our voting securities, regardless of the number of shares owned, may be required to file an application for a finding of suitability, the general rule provides that beneficial owners of more than 10% of any class of our voting securities must apply to the NV Gaming Authorities for a finding of suitability. Under certain circumstances, an “institutional investor” (as defined in the NGCA) who acquires more than 10% but not more than 25% of any class of our voting securities, may apply to the NV Gaming Authorities for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only.  An institutional investor that has obtained a waiver may, in certain circumstances, own up to 29% of the voting securities of a registered company for a limited period of time and maintain the waiver.  Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the NV Gaming Authorities, or who refuses or fails to pay the investigative costs in connection with investigation of its application, may be found unsuitable.  The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner.    Any shareholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of our common stock beyond such period of time as may be prescribed by the NV Gaming Authorities may be guilty of a criminal offense.We and NG Speedway would be subject to disciplinary action if, after receipt of notice that a person is unsuitable, we:

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• pay such a person any dividend or interest upon any of our voting securities;

• allow such a person to exercise, directly or indirectly, any voting right conferred through securities held by that person;

• pay remuneration in any form to such a person for services rendered or otherwise; or

• fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value.

Corporations registered with the NV Gaming Commission may not make a public offering of any securities without the prior approval of the NV Gaming Authorities if the securities or the proceeds therefrom are intended to be used to construct, acquire, or finance gaming facilities in the State of Nevada, or to retire or extend obligations incurred for those purposes or for similar purposes.An approval, if given, does not constitute a finding, recommendation, or approval by the NV Gaming Authorities as to the accuracy or adequacy of the prospectus or the investment merits of the securities, and any representation to the contrary is unlawful.

Because we are involved in gaming activities outside the State of Nevada, we are required to deposit with the NV Gaming Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay for the expenses of investigation by the NV Gaming Board of our participation in gaming in other jurisdictions.The revolving fund is subject to increase or decrease at the discretion of the NV Gaming Commission.Upon our registration and finding of suitability, we are also required to comply with certain other requirements imposed by the NGCA, including reporting requirements.

We currently do not operate any gaming establishment in the State of Nevada.

Note 17.   Impairment of Assets

Long-lived assets, including property, plant and equipment and amortizable intangible assets, comprise a significant portion of our total assets. We evaluate the carrying value of long-lived assets when impairment indicators exist or when circumstances indicate that impairment may exist under authoritative guidance. When management believes impairment indicators may exist, projections of the undiscounted future cash flows associated with the use of and eventual disposition of long-lived assets held for use are prepared. If the projections indicate that the carrying values of the long-lived assets are not recoverable, we reduce the carrying values to fair value. For long-lived assets held for sale, we compare the carrying values to an estimate of fair value less selling costs to determine potential impairment. We test for impairment of long-lived assets at the lowest level for which cash flows are measurable. These impairment tests are heavily influenced by assumptions and estimates that are subject to change as additional information becomes available. Our evaluation of the carrying value of our long-lived assets for sale indicates that we have no further impairment. This fair value measurement uses level 3 inputs under the fair value hierarchy.

On an annual basis, we review each of our notes receivable to evaluate whether the collection of our notes receivable and receivables are still probable. In our analysis, we review the economic feasibility and the current financial, legislative and development status of the project. If our analysis indicates that the project is no longer economically feasible, the note receivable will be written down to its estimated fair value.This fair value measurement uses level 3 inputs under the fair value hierarchy.

At January 31, 2014 and April 30, 2013, our balance sheet reflects notes receivable related to Big City Capital of $0, net of a $3.2 million allowance related to the development of gaming/entertainment projects from Big City Capital.During fiscal year ended April 30, 2008, we determined that our ability to collect $859,000 of accrued interest and $1.5 million of the original $3.2 million notes receivable from Big City Capital, LLC (“Big City Capital”) had been impaired. As a result we wrote down the notes receivable to $1.7 million, by establishing a $1.5 million allowance, and we wrote off the accrued interest. At April 30, 2012, we determined our ability to collect the remaining $1.7 million is doubtful and therefore increased the valuation allowance to $3.2 million. These notes receivable have a maturity date ofDecember 31, 2014.

At January 31, 2014 and April 30, 2013, our balance sheet reflects a receivable related to BVO of $0, net of a $4.6 million allowance.In the period ending April 30, 2012, we determined our ability to collect the $4.6 million BVO Receivable and its accrued interest was doubtful.Therefore we established a $4.6 million valuation allowance against its principal and interest due.

Note 18.   Stock Offering

On November 7, 2011, we closed on the sale of2,625,652 shares of our common stock at a price of $1.65 per share to certain investors through a registered direct offering for the total proceeds of approximately $4.3 million, net of offering costs of approximately $444,000.In addition, for each share of our common stock purchased by an investor, we issued to such investor a warrant to purchase0.75 shares of our common stock. The warrants have an exercise price of $2.18 per share and are exercisable forfive years from the initial exercise date, which date is six months from the date of their issuance.The warrants expire on May 7, 2017. The proceeds of the offering were used to assist us in the $5.1 million acquisition of South Dakota Gold.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and Notes thereto included in Item 1 of this Quarterly Report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report for the year ended April 30, 2013, filed on Form 10-K with the SEC on July 29, 2013.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. We prepare these financial statements in conformity with GAAP. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments. On an on-going basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. There have been no material changes or developments in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our Annual Report for the year ended April 30, 2013, filed on Form 10-K with the SEC on July 29, 2013.

Executive Overview

We were formed in 1977 and, since 1994, have primarily been a gaming company involved in financing, developing, owning and operating gaming properties. Our gaming facility operations are located in the United States of America (“U.S.”), specifically in the states of Washington and South Dakota.Our business strategy will continue to focus on owning and operating gaming establishments. If we are successful, our future revenues, costs and profitability can be expected to increase. However, there is no guarantee that we will be successful in implementing our business strategy in the future and, as such, no guarantee that our future revenues, costs and profitability will increase. Our net revenues were $14.8 million and $16.2 million for the three months ended January 31, 2014 and January 31, 2013, respectively.Our net revenues were $46.8 million and $49.4 million for the nine months ended January 31, 2014 and January 31, 2013, respectively.

When compared to the three months ended January 31, 2013, the three month period ended January 31, 2014 was impacted by the following items:

- Approximately 20% reduction of gaming devices at our South Dakota Gold route operation;

- Lower table games hold percentage at our Washington Gold casino operations;

-Write-off of loan issue costs related to extinguishment of debt; and

-Decreased net interest expense.

COMPARISON OF THE THREE MONTHS ENDED JANUARY 31, 2014 AND JANUARY 31, 2013

Net revenues. Net revenues year over year decreased 9.0%, to $14.8 million from $16.2 million,for the three month period ended January 31, 2014, compared to the same period ended January 31, 2013. Casino revenues declined 10.4%, to $12.8 million primarily due to a lower table games hold percentage which negatively impacted our Washington operations by approximately $0.8 million, a lower table games drop of approximately 4% and, a decrease in the number of gaming devices we operated at our South Dakota Gold route operations due to the closure of several gaming facilities in Deadwood, South Dakota. Food and Beverage revenues remained consistent.

Total operating expenses. Total operating expenses decreased 5.3%, to $14.5 million from $15.3 million, for the three month period ended January 31, 2014, compared to the same period ended January 31, 2013.Casino expenses decreased $0.5 million, or 6.4%, primarily due to decreased commissions, royalty fees and device taxes paid on our slot route. Food and beverage expenses increased $0.1 million, or 9.7%, primarily due to increased payroll benefit costs. Marketing and administrative expenses decreased $0.1 million, or 2.7%, primarily due to a conscience decision to reduce marketing costs. Facility expense decreased $0.1 million, or 17.4%, as a result of reduced operating supplies, payroll and related benefit costs. Corporate expenses decreased $0.2 million, or 25.0%, primarily due to a reduction in staff, reduced office rent due to our move from Houston to Las Vegas in March 2013, and a conscience effort to reduce other operating costs.Depreciation and amortization and, other expenses remained consistent.

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Interest income (expense) Interest expense decreased 31.1 %, or $116,000, for the three month period ended January 31, 2014, compared to the three month period ended January 31, 2013. The decrease is due to the reduction of outstanding debt since January 31, 2013 and the refinancing of all remaining debt in December 2013 (See Note 5 of our Consolidated Financial Statements). Interest income decreased $52,000 for the three month period ended January 31, 2014, compared to the three month period ended January 31, 2013, which was related to interest earned on notes receivables based on note terms.Amortization of loan issue cost was $44,300 and $85,119 for the three month periods ended January 31, 2014 and January 31, 2013, respectively. The reduction is due to the write-off of $283,550 of loan issuance costs due to our debt refinancing, offset by the addition of $449,000 of new loan issuance costs which is being amortized over the life of the new debt.

Income Taxes. For the three months ended January 31, 2014 and 2013, our overall effective income tax rates were 24.6% and 57.7% respectively. The decrease in the quarterly effective tax rate for the three months ended January 31, 2014 as compared to the same period of the prior year is primarily due to an increase in the FICA tip credit during 2014.

Net income (loss). Net loss from continuing operations was $(203,000) compared to net income of $188,200 for the three month periods ended January 31, 2014 and January 31, 2013, respectively. The decrease is primarily a result of the $0.6 million decreased operating income and the $0.3 million write-off of loan issue costs offset by the $0.4 million change in income tax benefits.

COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2014 AND JANUARY 31, 2013

Net revenues. Net revenues decreased 5.3%, to $46.8 million from $49.4 million, for the nine month period ended January 31, 2014 compared to the nine month period ended January 31, 2013. Casino revenues decreased 5.7%, or $2.5 million, due to decreased drop at our Washington properties due to abnormally dry weather conditions in the Seattle market during the first quarter of fiscal year 2014 compared to abnormally wet weather conditions during the first quarter of fiscal year 2013.Food and beverage and other revenues each decreased $0.1 million due to the Seattle weather conditions.In an effort to maintain revenues and market share promotional allowances only decreased $0.1 million.

Total operating expenses.Total operating expenses decreased 4.8% to $45.8 million from $48.1 million, for the nine month period ended January 31, 2014, compared to the nine month period ended January 31, 2013.Casino expenses decreased $0.6 million, or 2.3% primarily due to decreased commissions, royalty fees and device taxes paid on our slot route. Food and beverage increased $0.3 million, or 7.1%, primarily due to increased payroll benefit costs. Marketing and administrative, depreciation and amortization, and other expenses remained consistent. Facility expenses decreased $0.2 million or 14.4% primarily due to reduced operating supplies, payroll and related benefit costs. Corporate expenses decreased $1.4 million, or 43.5%, primarily as a result of a reduction in staff, reduced office rent due to our move from Houston to Las Vegas in March 2013, and a conscience effort to reduce other operating costs. In the current year we wrote-off $0.1 million of project development costs whereas in the prior year we recorded $0.7 million severance accrual for the former CEO and other Houston office employees and, a $0.3 million write-off of development costs during the nine months ended January 31, 2013.

Interest income (expense).Interest expense decreased 17.0 %, or $0.2 million, for the nine month period ended January 31, 2014 compared to the nine month period ended January 31, 2013. The decrease is primarily due to the reduction of outstanding debt since January 31, 2013 and the refinancing of all remaining debt in December 2013 (See Note 5 of our Consolidated Financial Statements). Amortization of loan issue costs was $210,000 and $248,000 for the nine month periods ended January 31, 2014 and January 31, 2013, respectively. The reduction is due to our debt refinancing completed in December 2013, (See Note 5 of our Consolidated Financial Statements).

Income Taxes. For the nine months ended January 31, 2014 and 2013, our overall effective income tax rates were 25.2% and 265.4%, respectively. The decrease in the year-to-date effective tax rate as of January 31, 2014 as compared to the same period of the prior year is primarily due to an increase in the FICA tip credit during 2014.

Net income (loss).Net loss from continuing operations was $(198,100) and $(324,000) for the nine month periods ended January 31, 2014 and January 31, 2013, respectively. The improvement of $0.1 million is primarily due to the reduction of operating and interest expenses described above offset by the decline in net revenues and the $0.3 million write-off of loan issuance costs recorded in the current year.

Non-GAAP Financial Measures

The term “adjusted EBITDA” is used by us in presentations, quarterly earnings calls, and other instances as appropriate.Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, non-cash goodwill and other long-lived asset impairment charges, write-offs of project development costs, litigation charges, non-cash stock option grants, exclusion of net income or loss from operations held for sale, and net losses/gains from asset dispositions. Adjusted EBITDA excludes the impact of slot and table games hold percentages compared to the prior year.Adjusted EBITDA is presented because it is a required component of financial ratios reported by us to our lenders, and it is also frequently used by securities analysts, investors, and other interested parties, in addition to and not in lieu of GAAP results to compare to the performance of other companies who also publicize this information.

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Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income as an indicator of our operating performance or any other measure of performance derived in accordance with GAAP.

The following table shows adjusted EBITDA by segment for the three months ended January 31, 2014 and January 31, 2013:

	For the three months ended January 31, 2014
							Total
			South Dakota		Corporate -		Continuing
	Washington Gold		Gold		Other		Operations
Revenues:
Gross revenues	$	14,348,330	$	1,498,344	$	2,078	$	15,848,752
Less promotional allowances		(1,082,360)		(5,525)		-		(1,087,885)
Net revenues		13,265,970		1,492,819		2,078		14,760,867
Expenses:		11,734,945		1,532,650		623,970		13,891,565
Adjusted EBITDA	$	1,531,025	$	(39,831)	$	(621,892)	$	869,302

	For the three months ended January 31, 2013
							Total
			South Dakota		Corporate -		Continuing
	Washington Gold		Gold		Other		Operations
Revenues:
Gross revenues	$	15,466,234	$	1,788,668	$	-	$	17,254,902
Less promotional allowances		(1,040,277)		(4,480)		-		(1,044,757)
Net revenues		14,425,957		1,784,188		-		16,210,145
Expenses:		12,064,454		1,789,339		802,278		14,656,071
Adjusted EBITDA	$	2,361,503	$	(5,151)	$	(802,278)	$	1,554,074

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The following table shows adjusted EBITDA by segment for the nine months ended January 31, 2014 and January 31, 2013:

	For the nine months ended January 31, 2014:
							Total
			South Dakota		Corporate -		Continuing
	Washignton Gold		Gold		Other		Operations
Revenues:
Gross revenues	$	42,707,443	$	7,296,167	$	7,070		50,010,680
Less promotional allowances		(3,173,861)		(20,785)		-	$	(3,194,646)
Net revenues		39,533,582		7,275,382		7,070		46,816,034
Expenses:		35,562,574		6,582,489		1,806,260		43,951,322
Adjusted EBITDA	$	3,971,008	$	692,893	$	(1,799,190)	$	2,864,711

	For the nine months ended January 31, 2013
							Total
			South Dakota		Corporate -		Continuing
	Washignton Gold		Gold		Other		Operations
Revenues:
Gross revenues	$	44,602,190	$	8,097,746	$	-		52,699,936
Less promotional allowances		(3,275,614)		(19,785)		-	$	(3,295,399)
Net revenues		41,326,576		8,077,961		-		49,404,537
Expenses:		35,700,916		7,152,452		2,416,668		45,270,036
Adjusted EBITDA	$	5,625,660	$	925,509	$	(2,416,668)	$	4,134,501

The following table reconciles adjusted EBITDA to net income (loss) for the three months ended January 31, 2014 and January 31, 2013:

Adjusted EBITDA reconciliation to net loss:

	For the three months ended
	January 31, 2014		January 31, 2013
Net income (loss)	$	(203,038)	$	235,356
Add:
Income tax expense (benefit)		(72,643)		368,673
Net interest expense (income)		270,077		370,981
Loss on extinguishment of debt		283,550		-
Loss on sale of assets		7,412		2,132
Depreciation and amortization		565,030		550,609
Deferred rent		3,632		19,034
Stock option and ESPP grants		15,282		54,479
(Income) on operations held for sale		-		(47,190)
Adjusted EBITDA	$	869,302	$	1,554,074

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The following table reconciles adjusted EBITDA to net income (loss) for the nine months ended January 31, 2014 and January 31, 2013:

Adjusted EBITDA reconciliation to net loss:

	For the nine months ended
	January 31, 2014		January 31, 2013
Net income (loss)	$	(198,108)	$	(415,527)
Add:
Income tax expense (benefit)		(116,480)		348,987
Net interest expense (income)		1,066,234		1,311,270
Impairments/Write offs		56,959		257,733
Loss on extinguishment of debt		283,550		-
Loss on sale of assets		15,929		5,095
Depreciation and amortization		1,692,254		1,628,124
Deferred rent		18,072		57,101
Stock option and ESPP grants		46,301		124,238
Severance expense		-		725,877
Loss on operations held for sale		-		91,603
Adjusted EBITDA	$	2,864,711	$	4,134,501

Liquidity and Capital Resources

Historical Cash Flows

The following table sets forth our consolidated net cash provided by (used in) operating, investing and financing activities for the nine month periods ended January 31, 2014 and January 31, 2013:

	Nine Months Ended
	January 31,		January 31,
	2014		2013
Net cash provided by (used in):
Operating activities	$	928,926	$	3,090,801
Investing activities		(97,292)		208,376
Financing activities		(1,868,736)		(1,711,310)

Operating activities. Net cash provided by operating activities during the nine month period ended January 31, 2014 decreased by $2.1 million over the comparable period in the prior fiscal year. This decrease mainly resulted from a net $1.6 million use of cash to purchase operating assets and pay down operating liabilities, a net $0.2 million reduction of project development cost write-offs, a $0.4 million net reduction in restricted cash, a net $0.4 million reduction in deferred income tax benefit, offset by $0.2 million improved net income and a $0.3 million write-off of deferred loan issuance costs.

Investing activities. Net cash used in investing activities during the nine month period ended January 31, 2014 increased to $0.1 million compared to net cash provided by of $0.2 million for the comparable period in the prior fiscal year. The decrease of funds provided is primarily due to the $0.8 million proceeds from the Colorado Grande Casino sale which occurred in the prior fiscal year offset by $0.2 million reduction of property and equipment purchases, $0.2 million additional collections on notes receivable and no expenditures for development costs versus the prior year of $0.1 million.

Financing activities.Net cash used in financing activities during the nine month period ended January 31, 2014 increased $0.2 million from the comparable period in the prior fiscal year. The increase is primarily attributable to $0.5 million prepayment of deferred loan issue costs, $12.2 net repayment of credit facilities offset by $12.6 net proceeds from borrowed funds.

Future Sources and Uses of Cash

We expect that our future liquidity and capital requirements will be affected by:

-capital requirements related to future acquisitions;

- cash flow from operations;

- new management contracts;

- working capital requirements;

- obtainingdebt financing; and

- debt service requirements.

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At January 31, 2014, outstanding indebtedness was $12.75 million, of which $1.6 million is due by January 31, 2015.

On December 18, 2013, the Company and certain of its subsidiaries entered into a new $12,750,000 Reducing Revolving Credit Agreement with Mutual of Omaha Bank (the “Credit Facility”).  The Credit Facility and $1,170,000 of the Company’s cash were utilized to pay down all of the Company’s outstanding long term debt obligations.The maturity date of the Credit Facility is December 10, 2018, and is secured by liens on substantially all of the real and personal property of the Company and its subsidiaries. The interest rate on the borrowing is based on LIBOR plus an Applicable Margin, which will be determined quarterly, based on the total leverage ratio for the trailing twelve month period.The initial Applicable Margin is 5.00% until July 1, 2014, when the first quarterly pricing change will take effect.In addition, the Company is required to fix the interest rate on at least 50% of the borrowing through a swap agreement.

As of January 31, 2014, scheduled principle payments on the Credit Facility for each of the next five years and thereafter are as follows:

February 1, 2014 – January 31, 2015	$	1,600,000
February 1, 2015 – January 31, 2016	$	1,700,000
February 1, 2016 – January 31, 2017	$	1,800,000
February 1, 2017 – January 31, 2018	$	1,900,000
February 1, 2018 – December 10, 2018	$	5,750,000

The Credit Facility contains customary covenants for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of the Company’s assets and covenants restricting our ability to merge, transfer ownership, incur additional indebtedness, encumber assets and make certain investments.  The Credit Facility also contains covenants requiring the Company to maintain certain financial ratios commencing as of the fiscal quarter ending April 30, 2014, such as a minimum total leverage ratio ranging from 3.00 to 1.00 through July 31, 2015, 2.50 to 1.00 from August 1, 2015 through January 31, 2017, and 2.00 to 1.00 from February 1, 2017 until maturity; and lease adjusted fixed charge coverage ratio no less than 1.15 to 1.00.

The Company evaluated the refinancing transaction in accordance with the accounting standards for debt modifications and extinguishments and evaluated the refinancing transaction on a lender by lender basis. As a result of this evaluation, the Company concluded the refinancing was an extinguishment of debt and recognized a loss on debt extinguishment of $283,550 representing the write-off of unamortized debt issuance costs as of the date of the refinancing. In connection with the refinancing transaction, the Company paid $449,000 in fees and other costs which have been capitalized and included in other assets on the consolidated balance sheet.

We are required by the Credit Facility to have a secured interest rate swap for at least 50% of the remaining Credit Facility principal balance. The Company has an approved interest rate swap policy which establishes guidelines for the use and management of interest rate swaps to either reduce the cost or hedge existing or planned debt. The policy states that the Company shall not enter into swap transactions for speculative purposes. At the inception of any hedge agreement, as required by ASC 815,Derivatives and Hedging, the Company documented the hedging relationship and the risk management objective and strategy for the undertaking of all qualifying hedges.

On January 17, 2014, the Company entered into a swap transaction with Mutual of Omaha Bank (“MOOB”), which has a calculation period as of the tenth day of each month beginning with February 10, 2014 until the maturity date of the Credit Facility. As of January 31, 2014, the Company had one outstanding interest rate swap with MOOB with a notional amount of $6,375,000 at a swap rate of 1.52%, which as of January 31, 2014, effectively converts $6,375,000 of our floating-rate debt to a synthetic fixed rate of 6.18%. Under the terms of the swap agreement, the Company pays a fixed rate of 1.52% and receives variable rate based on one-month LIBOR as of the first day of each floating-rate calculation period. Under the ISDA Confirmation, the initial floating index was set at 0.157%.

The Company will not designate the interest rate swap as a cash flow hedge and the interest rate swap will not qualify for hedge accounting under ASC Topic 815. Changes in our interest rate swap fair value will be recorded in our Consolidated Statements of Operations.

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As required by ASC 815, on a quarterly basis, the Company will assess whether any changes to the hedge instrument, or underlying debt agreement, have occurred which would alter the original designation of the hedge instrument. Each quarter, the Company receives fair value statements from the counterparty, MOOB. The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. To comply with the provisions of ASC Topic 820,Fair Value Measurements and Disclosures, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. As a result of our evaluation of our interest rate swap as of January 31, 2014, we did not record any changes in our interest rate swap fair value for the three or nine months ended January 31, 2014.

The 268 acres of vacant land in Black Hawk, Colorado is currently held for sale. If the acreage is sold, we will use the proceeds to reduce debt.On October 31, 2011, we took an impairment charge of $2.3 million on this land thereby writing it down to the estimated value of $1.1 million.

On January 31, 2014, excluding restricted cash of $1.3 million, we had cash and cash equivalents of $5.7 million. The restricted cash consists of approximately $1.3 million of player supported jackpots.

Our Consolidated Financial Statements have been prepared assuming that we will have adequate availability of cash resources to satisfy our liabilities in the normal course of business. We have made, and are in the process of making, arrangements to ensure that we have sufficient working capital to fund our obligations as they come due. These potential funding transactions include divesting of non-core assets and obtaining long-term financing. We believe that some or all of these sources of funds will be funded in a timely manner and will provide sufficient working capital for us to meet our obligations as they come due; however, there can be no assurance that we will be successful in divesting of the non-core assets or achieving the desired level of working capital at terms that are favorable to us. Should cash resources not be sufficient to meet our current obligations as they come due, repay or refinance our long-term debt, and acquire operations that generate positive cash flow, we would be required to curtail our activities and grow at a pace that cash resources could support which may require a restructuring of our debt or selling core assets.

Liquidity

The current ratio is an indication of a company’s market liquidity and ability to meet creditor’s demands. Acceptable current ratios vary from industry to industry and are generally between 1.25 and 3.0 for healthy businesses. If a company’s current ratio is in this range, then it generally indicates good short-term financial strength. If current liabilities exceed current assets (the current ratio is below 1), then the company may have problems meeting its short-term obligations. If the current ratio is too high, then the company may not be efficiently using its current assets or its short-term financing facilities. This may also indicate problems in working capital management.The table below shows that, as of January 31, 2014, we have a 1.9 working capital ratio.

		Current Ratio as of January 31, 2014
Current Ratio	Current Assets	$	9,075,460	1.9
	Current Liabilities	$	4,825,011

Off-Balance Sheet Arrangements

None.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to our management, including our President and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.

In accordance with Rules 13a-15 and 15d-15 of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our President and CFO, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. As a result of our evaluation, they concluded that our disclosure controls and procedures were effective as of January 31, 2014.

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Changes in internal controls over financial reporting. There have not been any changes in our control over financial reporting during the three months ended January 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

We are not currently involved in any material legal proceedings.

Item 1A. Risk Factors

There have been no material changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2013, filed with the SEC on July 29, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

See the Index to Exhibits following the signature page hereto for a list of the exhibits filed pursuant to Item 601 of Regulation S-K

INDEX TO EXHIBITS

EXHIBIT NUMBER	DESCRIPTION
10.1	First Amendment to Asset Purchase Agreement between Colorado Grande Enterprises, Inc., as seller, and G Investments, LLC, as purchaser (filed previously as Exhibits 10.1 to the Company’s Form 8-K filed May 29, 2012).
10.2	Third Amended and Restated Promissory Note dated May 25, 2012 issued by Nevada Gold & Casinos, Inc. to Louise H. Rogers, as her separate property (filed previously as Exhibits 10.1 to the Company’s Form 8-K filed June 1, 2012).
10.3	May 2012 Amended and Restated Security Agreement dated May 25, 2012 between Nevada Gold & Casinos, Inc. and Louise H. Rogers, as her separate property (filed previously as Exhibits 10.2 to the Company’s Form 8-K filed June 1, 2012).
10.4	Credit Agreement dated June 27, 2012 by and among Wells Fargo Gaming Capital, LLC, as administrative agent, the Lenders that are parties thereto, Nevada Gold & Casinos, Inc., as parent, and A.G. Trucano, Son & Grandsons, Inc., as borrower (filed previously as Exhibits 10.1 to the Company’s Form 8-K filed July 3, 2012).
10.5	Guaranty and Security Agreement dated June 27, 2012 among Nevada Gold & Casinos, Inc., certain Grantors listed on the signature page and Wells Fargo Gaming Capital, LLC, in capacity as administrative agent (filed previously as Exhibits 10.2 to the Company’s Form 8-K filed July 3, 2012).
10.6	Intercompany Subordination Agreement dated June 27, 2012 by and among certain Obligors listed on the signature page in favor of Wells Fargo Gaming Capital, LLC, in capacity as administrative agent (filed previously as Exhibits 10.3 to the Company’s Form 8-K filed July 3, 2012).

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10.7	Amendment Number Two to Credit Agreement dated October 7, 2011 by and among Wells Fargo Gaming Capital, LLC, in capacity as administrative agent and lender, Nevada Gold & Casinos, Inc., as parent, and NG Washington, LLC, NG Washington II, LLC and NG Washington III, LLC, as borrowers(filed previously as Exhibits 10.4 to the Company’s Form 8-K filed July 3, 2012).
10.8	Intercreditor Agreement and Subordination dated June 27, 2012 by and between Wells Fargo Gaming Capital, LLC, as administrative agent, and Michael J. Trucano, as sellers’ representative (filed previously as Exhibits 10.5 to the Company’s Form 8-K filed July 3, 2012).
10.9	Credit Agreement dated December 10, 2013 by and among Mutual of Omaha Bank, as the Lender, Nevada Gold & Casinos, Inc., as parent, and Restricted Subsidiaries, as borrower(filed previously as Exhibits 10.9 to the Company’s Form 10-Q filed December 23, 2013).
31.1(*)	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2(*)	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1(*)	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2(*)	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema
101.CAL	XBRL Taxonomy Calculation Linkbase
101.DEF	XBRL Taxonomy Definition Linkbase
101.LAB	XBRL Taxonomy Label Linkbase
101.PRE	XBRL Taxonomy Presentation Linkbase

* Filed or furnished herewith.

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: March 18, 2014

Nevada Gold & Casinos, Inc.
By:	/s/ James J. Kohn
James J. Kohn
Chief Financial Officer
(Principal Financial Officer)

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