At first, the preparation of this year’s President’s Letter seemed both daunting and simplistic—merely encapsulate the significant events of the last twelve months. With a certain amount of pride, just let the letter ‘write itself’ from the perspective of “this is what we did.”
But, as each accomplishment unfolded throughout the letter, my thoughts became centered not on what ‘we did’, but the collaborative efforts of so many people including private citizens, government agencies, consultants, business partners, attorneys, accountants, architects, etc., that have been the catalyst for management and the board of directors to successfully accomplish “what everyone did.”
Invaluable to that collaborative effort has been the Company’s 2006 retention of Robert (Bob) F. Gross, President of RFG Gaming & Hospitality, LLC as an independent consultant to support the Company in its Tribal gaming and conventional, jurisdictional gaming business plan.
Bob’s passion in the gaming industry has encompassed 35+ years of impressive executive management experience. He has developed and managed commercial gaming properties and Native American owned gaming properties including Nez Perce Gaming Enterprises, Santa Ana Star Hotel Casino Resort, Dunes Hotel & Casino, Rancho Mesquite Casino & Holiday Inn Hotel, WSR Corporation dba Oasis Resort Hotel & Casino, Santa Fe Hotel & Casino Resort, as well as Table Mountain Casino & Bingo and Cher Ae Heights Casino during most of our Company’s tenure with these two operations.
With Bob’s expertise and relationships in the gaming industry, he was given an initial mandate to identify Tribal gaming opportunities with potential revenue streams from capital/financing assistance, development assistance and/or management or consulting. To manage the Tribal gaming operations, the Company formed Brownstone, LLC with Bob appointed as Chief Executive Officer, myself as Chairman and our Chief Accounting Officer, Anna M. Morrison named as Brownstone, LLC’s Chief Financial Officer.
A five-month proposal process, that began with nearly 20 bidders, ended successfully in March 2007 when Brownstone, LLC entered into a development agreement with the Big Sandy Rancheria Tribe of Western Mono Indians. Brownstone, LLC differentiated their proposal by assembling a world-class team of experienced gaming associates in the legal, architectural, design and finance fields to complement Brownstone, LLC’s leadership, operational and management skills. As currently planned, the destination resort project includes a 300-room hotel with a 125,000 sq. ft. casino, restaurants, and related amenities. The hotel and gaming facility will be constructed overlooking the San Joaquin Valley in Friant, California near Fresno.
From March 2007 through October 2007, Anna Morrison, Bob Gross and the Tribe’s financial partner assisted the Tribe with financial modeling and business plan documents, due diligence support, and review of financing proposals which culminated in an interim funding of approximately $39,900,000 for the project predevelopment costs. Subsequent to the funding, Brownstone, LLC has been involved in all aspects of the project’s predevelopment process with the Tribe and their architects, engineers, attorneys, Bureau of Indian Affairs and the State of California.
Brownstone, LLC and the Tribe are also currently negotiating a consulting contract to assist the Tribe in operating the hotel and gaming facility once it is constructed and opened.
In July 2007, the Company, again with Bob Gross, also began predevelopment activity for its planned GoldTown Hotel and Casino Resort project. The GoldTown Hotel and Casino Resort is a two-phase development to be located on a 45+ acres of land in Douglas County, Nevada. The current Phase I plans, estimated at approximately $125,000,000, includes an up to 300-room/suite resort, approximately 95,000 sq. ft. full-service casino, restaurants, convention facility, entertainment venues, and other related amenities. The project is expected to consist of approximately 30 acres of mixed-use development.
Douglas County is the site of some of Nevada’s earliest developments with historic communities scattered along the base of the Sierra Nevada Mountain range. Recognizing the strong essence of community pride, Company management, Bob Gross and our architects, Group West Companies, PLLC, spent several months meeting with local homeowners associations, businesses, county planning members, etc. to facilitate an open dialogue on the project.
At public meetings held on January 3, 2008 and February 5, 2008, the Douglas County Board of Commissioners approved Phases I and II in their entirety, including a building height variance, amendment to the existing special use permit, zoning map amendments, relocation of the gaming district overlay and tourist commercial zoning district, and reclassification of the remaining project site to ‘general commercial’. Our sincere thanks for the time and effort spent by Group West Companies, PLLC, James R. Cavilia, Esq. with the Carson City, Nevada firm of Allison, MacKenzie, Pavlakis, Wright & Fagan, the homeowners associations, Carson Valley businesses, planning commissions and the Douglas County Board of Commissioners.
During September 2007 and as amended in March 2008, the Company completed the acquisition of the New York City-based recruiting and temporary placement firm, Candidates on Demand Group, Inc. (“COD”). COD employs approximately 150 people and also has regional offices in North Palm Beach, Florida, Dallas, Texas, Melville, New York, Westchester County, New York and Lyndhurst, New Jersey. COD began operations in 2002 and for calendar year 2006 had audited revenues of $10.9 million and EBITDA of $859,000.
COD was purchased from its founder and sole shareholder, Michael C. Woloshin. During January 2008, Michael requested to step-down from his Chief Executive Officer responsibilities to focus on his business strengths, servicing and maintaining current clients, as well as business development. The Company appointed Anna Morrison as COD’s Interim Chief Executive Officer, and is actively interviewing candidates to permanently fill the CEO position.
It’s a pleasure to again congratulate our Border Grill Las Vegas Restaurant (the “Border Grill”) partners, management and employees for another record-breaking year. Audited Border Grill 2007 operating results reported revenues of $9,825,000 as compared to $8,605,000 for 2006, and that net income increased from $1,425,000 for 2006 to $1,779,000 for 2007. During May 2007, the Mandalay Bay Resort and Casino (now owned by MGM/Mirage) extended the Border Grill’s lease through June 2021. And, as previously announced, a $2,500,000 remodel and refurbishment of the Border Grill is anticipated to begin during April 2008 and be completed by August 2008.
In the June 30, 2007 “Annual Report to Stockholders” I mentioned that “one last loose end to manage” resulting from the 2005 sale of the former media assets and operations. Ironically, the “loose end” took longer to settle than we actually owned the media assets. However, despite a formal complaint from Genius Products, Inc. (“Genius”) with requested damages up to $2,400,000, during late-February 2008, the Company settled its litigation with a recorded non-cash net loss of $246,000. Major terms of the settlement include Genius’s unconditional release of 75,000 shares of Genius common stock (“GNPI”) to the Company, the release of 450,000 shares of escrowed GNPI stock to the Company, the release of 150,000 shares of escrowed GNPI stock to Genius, a
mutual release from all future claims, and an extension of the expiration date of the Genius warrants held by the Company to September 2, 2012.
During 2007, the Company added one new member and returned a former member to our Board of Directors. Brian T. Seager, a real estate developer with projects in Las Vegas, Arizona and Utah, joined the Company’s Board as a new member during September. In addition to his current responsibilities as an independent member of the audit and compensation committees, Brian is providing assistance to the Company in planning for the development of the GoldTown Hotel and Casino Resort’s available thirty acres of mixed-use property.
Douglas R. Sanderson was appointed to our Board during November, but had previously served as a member from 1992 to 1997. Doug is President of Las Vegas-based La Jolla Gaming, but has also held President/CEO or other executive positions with Fortune Entertainment Corporation, Sega Gaming Technology, Inc. and Bally Gaming, Inc. Doug is also a former director of sales for International Game Technology, Inc. (IGT). Doug’s exceptional experience in the gaming industry has added depth to an already strong, experienced and independent Board.
Randolph C. Read, a member of our Board since 2003, resigned during 2007 due to personal and professional reasons.
Lastly and with deep sorrow, 2007 marked the sudden and very unexpected passing of our Board member, my best friend and wife of 21 years, Audrey K. Tassinari. Besides a strong advocate for the stockholders and a sounding board for me, she always offered an unbiased, unprejudiced--usually correct--solution to the business issues that we confronted through the years. Audrey’s presence is sorely missed on our Board and in my personal and family life. In closing, my family and I would like to acknowledge the many expressions of sympathy and condolence that we received from stockholders, business associates and friends.
As always, our AVCS Board of Directors and management team thank you for your continued support, and I look forward to reporting updates on these projects and/or other newsworthy developments on our web site and through press releases as they happen.
Sincerely,
/s/ Ronald J. Tassinari
Ronald J. Tassinari
Chairman, President and Chief Executive Officer
March 27, 2008
