Most managers will tell you that a business year has a rhythm.
The disposal of the media assets in March 2005 resulted in a cacophony of sound that signaled a year primarily spent on the clean-up of a myriad of loose ends resulting from those assets (with one remaining loose end which I will discuss below).
To the outside observer, 2006 was quieter. During that year, we issued only three press releases, all earnings releases. Internally, the Board and management were taking careful, measured steps to review and assess many potential business opportunities. The year 2006 started the project momentum that set a tempo for 2007.
And, although only partially through 2007, we are in a period of dramatic forward motion.
On March 28, 2007, we announced that through a majority-owned subsidiary, Brownstone, LLC, we have returned to the tribal gaming industry by entering into a Development Agreement with the Big Sandy Rancheria Tribe of Western Mono Indians.
The Development Agreement provides that Brownstone will assist the Big Sandy Rancheria Tribe in completing the following project services:
Arranging third party interim and permanent financing
Meeting federal, state and local compliance with regulatory matters
Identifying and negotiating contractual arrangements with architects,
contractors, consultants and other professionals for the development,
construction and operation of the project
Developing the project business plan
Consulting with respect to recruiting, hiring and training of all management
and operational staff
For these services, Brownstone will receive a structuring fee for the initial, interim and permanent financings as well as a total project development fee. We are now negotiating a post-development consulting arrangement to assist the Tribe with operations for the entire destination resort.
The Big Sandy project offers the potential for a tribal gaming consulting business that will provide revenues for a number of years; but, only a finite number of years. The nature of the tribal gaming consulting business requires a dependence on a backlog of tribal gaming projects to ensure a continued revenue source.
To mitigate this risk, the Board and management expanded its vision to seek non-tribal gaming projects. To that end, on July 2, 2007, we announced the pre-development of the GoldTown Hotel & Casino Resort project. GoldTown is a two phase project with an estimated Phase I construction cost of $125 million. GoldTown will be located on a 45+ acre parcel in Douglas County, within minutes of Nevada’s capital, Carson City, and have easy access to major routes leading to Lake Tahoe, San Francisco, Sacramento and Reno.
The preliminary Phase I plans include 300 hotel rooms and suites, 92,000 square feet of casino space, 1,000 slot and video poker machines, 24 to 30 table games, a 350-seat bingo parlor, 6-table poker room, race and sports book, 250-seat celebrity concert stage and lounge, restaurants, convention facility and 50,000 square feet of retail indoor boutique-style shopping.
In addition to our equity ownership in the GoldTown Hotel and Casino Resort, we expect to receive development and management fees from the hotel and casino operations.
In order to ensure revenues and earnings while our gaming projects develop, on July 12, 2007 we also announced that our Board had approved, subject to obtaining certain banking and other consents, the acquisition of the New York City-based recruiting and temporary placement firm of Candidates on Demand Group, Inc. COD employs a staff of approximately 150 people with regional offices in New York, North Palm Beach, Florida, Dallas, Texas, Melville, New York, Westchester and Lyndhurst, New Jersey.
Although COD began operations in 2002 it has quickly reached profitability. For calendar years 2006 and 2005, COD had audited revenues of $10.9 million and $7.8 million and EBITDA of $859,000 and $937,000, respectively. For 2005, COD was ranked as one of the fastest growing recruiting firms in New York by Crain’s New York Business Magazine. COD’s extended customer base includes Fortune 500 companies with operations in the IT, legal, accounting, financing and engineering disciplines. COD’s extended plans include increasing their existing recruiting staff, as well as opening new offices in Boston, Atlanta, Chicago, Los Angeles, Raleigh, Philadelphia and Phoenix.
At August 29, 2007, we are continuing to work with COD management on obtaining the various required consents.
I am also pleased to report that the Border Grill Las Vegas Restaurant is continuing to break its own sales records. For the six months ended June 30, 2006, the Border Grill reported sales and net income of $4,429,000 and $894,000, respectively. For the six months ended June 30, 2007, the Border Grill reported increased sales and net income of $5,316,000 and $1,000,000, respectively. This success has resulted in the May 1, 2007 signing of a lease extension through June 2021 with the Las Vegas-strip property, the Mandalay Bay Resort & Casino (owned by MGM). The extension is conditioned upon a minimum $2.0 million expansion and refurbishment expected to begin during late-2007.
Also during 2007, our Board accepted the resignation of Randolph C. Read, who resigned due to personal and professional reasons. We wish to extend our sincere thanks for the time commitment that Randy had expended in the Company’s interests as Chair of the Mergers and Acquisitions Committee and Compensation Committee, as well as a member of the Audit Committee.
And, we still have that one loose end to manage. During June 2007 the Company was served with a complaint filed by Genius Products, Inc. for damages and equitable relief in connection with the March 21, 2005 Agreement and Plan of Merger for the sale of American Vantage Media Corporation. The Company intends to fully and vigorously defend against this action. In response to the complaint, during July 2007, the Company filed a Motion to Strike the complaint in the Superior Court of the State of California. The Company may also assert counterclaims against Genius arising out of the merger agreement.
Finally, with deep sorrow the Company announced the sudden and unexpected passing of Audrey K. Tassinari, a former executive officer, a board member, my wife of 21 years and my very best friend. Besides being a strong advocate for the stockholders, as well as a sounding board for me, she always offered an unbiased—and usually correct—solution to the business issues that we confronted through the years. Appreciation of Audrey’s singular spirit has been evident from the overwhelming messages of sympathy and condolences we have received from business associates and friends. My family and I sincerely thank you.
As always we appreciate our stockholders’ support of our Company and I look forward to reporting updates on these projects and any other newsworthy developments as they happen.