<PAGE>2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period to
---------- ----------
Commission file number - 33-98184
CASINO JOURNAL PUBLISHING GROUP, INC.
(Formerly GAMING VENTURE CORP., U.S.A.)
Exact name of Registrant as specified in its charter)
NEVADA 22-3378922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification
Number)
8025 Blackhorse Pike, Bayport One, Suite 470
West Atlantic City, NJ 08232
(Address of principal executive offices) (Zip Code)
(201) 599-8484
(Registrant's telephone number, including area code)
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 and Exchange
Act of 1934 during the preceding twelve months (or such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to file such filing requirements for the past thirty days.
Yes x No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report:
5,001,734 Shares of Common Stock ($.001 par value)
(Title of Class)
Transitional Small Business Disclosure Format (check one):
Yes No x
------- -------
<PAGE>3
Casino Journal Publishing Group, Inc.
PART I: Financial Information
ITEM 1 - Financial statements
ITEM 2 - Management's' discussion and analysis of
financial condition and results of operations
PART II: Other Information
ITEM 6 - Exhibits and Reports on Form 8-K
<PAGE>4
PART I
Item 1. Financial Statements:
CASINO JOURNAL PUBLISHING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
------
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Current assets
Cash $ 1,201,029 $ 1,124,140
Accounts receivable 1,792,332 1,137,593
Investment in marketable securities 1,552,197 1,272,889
Inventories 33,986 33,648
Loans receivable, employees 11,259 7,034
Deferred promotion costs,
less accumulated amortization
of $322,000 and $216,000 527,230 541,161
Prepaid expenses 104,962 123,991
--------- ---------
Total current assets 5,222,995 4,240,456
Property and equipment - at cost,
less accumulated depreciation
and amortization 251,079 250,240
Goodwill, less accumulated
amortization of $157,412 and $91,447 1,676,520 1,742,485
Loans receivable, shareholders
and related parties 732,311 626,910
Other assets 43,038 46,481
----------- ----------
$ 7,925,943 $ 6,906,572
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable $ 100,000 $ 100,000
Accounts payable and accrued expenses 1,220,953 1,222,383
Current portion of deferred
subscription revenues 2,140,994 1,286,813
Deferred trade show revenues - 312,978
Current portion of deferred
advertising revenues 86,389 83,328
Income taxes payable 148,000 -
--------- ---------
Total current liabilities 3,696,336 3,005,502
--------- ---------
Deferred subscription revenues,
less current portion 360,275 252,785
--------- ---------
Deferred advertising revenues,
less current portion - 34,728
--------- ---------
Shareholders' equity
Common stock, $.001 par value;
50,000,000 shares authorized,
5,001,734 and 4,968,734 shares
issued and outstanding in
1999 and 1998, respectively 5,002 4,969
Additional paid-in capital 3,990,111 3,928,769
Unrealized loss on investments (347,924) ( 72,292)
Retained earnings (deficit) 222,143 (247,889)
--------- ---------
3,869,332 3,613,557
--------- ---------
$7,925,943 $6,906,572
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>5
CASINO JOURNAL PUBLISHING GROUP, INC. AND SUBSIDIARIES
Condensed CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues $ 3,638,920 $ 2,624,699 $ 6,756,416 $ 4,705,033
Direct costs 1,802,546 1,029,240 3,430,839 2,182,449
---------- ---------- ---------- ----------
Gross profit 1,836,374 1,595,459 3,325,577 2,522,584
General and administrative
expenses 1,418,983 1,184,968 2,661,466 2,272,438
---------- ---------- ----------- ----------
Income from operations 417,391 410,491 664,111 250,146
Other income 8,857 30,668 19,115 6,517
Income before income taxes
and minority interest 426,248 441,159 683,226 256,663
Income taxes 148,000 128,000 148,000 128,000
--------- --------- -------- --------
Income before minority
interest 278,248 313,159 535,226 128,663
Minority interest in earning
(loss) of American Gaming
Summit, LLC (5,206) - 65,194 -
--------- --------- --------- ---------
Net income $ 283,454 $ 313,159 $ 470,032 $ 128,663
========= ========= ========= =========
Basic and diluted income
per share $ .06 $ .07 $ .09 $ .03
========= ========= ========= =========
Shares used in calculation of
income per share 4,984,097 4,633,020 4,979,071 3,803,245
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>6
CASINO JOURNAL PUBLISHING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
1999 1998
------ ------
<S> <C> <C>
Cash flows from operating activities
Net income $ 470,032 $ 128,663
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 100,933 51,269
Minority interest in earnings of American Gaming
Summit, LLC 65,194 -
Changes in assets and liabilities
Accounts receivable (654,739) ( 9,878)
Inventories ( 338) 3,234
Deferred promotion expenses 13,931 -
Prepaid expenses 19,029 (523,887)
Other assets 3,443 17,473
Accounts payable and accrued expenses ( 1,430) (196,397)
Deferred subscription revenues 961,671 182,423
Deferred trade show revenues (312,978) -
Deferred advertising revenues ( 31,667) -
Income taxes payable 148,000 80,823
-------- -------
Net cash provided by (used in)
operating activities 781,081 (266,277)
-------- --------
Cash flows from investing activities
Additions to property and equipment ( 35,807) ( 60,877)
Investment in marketable securities, net (554,940) 39,664
Loans receivable, employees ( 4,225) 3,322
Loans receivable, shareholders and related parties (105,401) (253,222)
-------- --------
Net cash used in investing activities (700,373) (271,113)
-------- --------
Cash flows from financing activities
Notes payable - 200,000
Principal payments on loan payable, automobile - ( 9,025)
Issuance of common stock 61,375 200,238
Dividends paid - ( 62,350)
Dividends paid to minority interest ( 65,194) -
-------- --------
Net cash provided by (used in)
financing activities ( 3,819) 328,863
-------- --------
Net increase (decrease) in cash 76,889 (208,527)
Cash, beginning of period 1,124,140 1,361,720
---------- ----------
Cash, end of period $ 1,201,029 $ 1,153,193
=========== ===========
Supplemental cash flow disclosures
Interest paid $ 7,366 $ 19,145
======= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>7
CASINO JOURNAL PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 - Acquisition
On April 3, 1998, the Company and its combined affiliates merged with
Gaming Venture Corp., U.S.A., a Nevada corporation ("Gaming"). The
Company and its combined affiliates became wholly owned subsidiaries of
Gaming, the legal acquiror. As the shareholders of the Company and its
combined affiliates acquired approximately 65% of Gaming's outstanding
voting shares, the merger was accounted for as a reverse acquisition of
Gaming by the Company, the accounting acquiror in the transaction.
The total cost of the acquisition was $3,726,235, consisting of the
purchase price of $3,217,468, measured by the 1,608,734 common shares
retained by Gaming's shareholders at their fair value at the closing
date of $2.00 per share, and the value of stock options ($350,000)
granted to shareholders of the Company, plus transaction costs of
$158,767.
Simultaneous with the acquisition, Gaming changed its name to Casino
Journal Publishing Group, Inc.
2 - Basis of Presentation
The accompanying unaudited condensed consolidated balance sheet as of
June 30, 1999 and the related accompanying unaudited condensed
consolidated statements of income and cash flows include the results of
operations and cash flows of the Company and its subsidiaries. The
accompanying unaudited condensed consolidated statements of income and
cash flows for the six months ended June 30, 1998 include the results
of operations and cash flows of the Company and its subsidiaries, and
of Gaming for the period beginning April 3, 1998. All significant
intercompany transactions and balances have been eliminated.
The financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and applicable SEC regulations. They do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year.
The balance sheet as of December 31, 1998 has been derived from the
audited consolidated financial statements of the Company, but does not
include all disclosures required by generally accepted accounting
principles. The accompanying financial statements should be read in
conjunction with the Company's audited financial statements for the
year ended December 31, 1998.
3 - DEFERRED PROMOTION COSTS
The Company began several direct mailing programs in 1998. It accounts
for direct-response advertising costs in accordance with the American
Institute of Certified Public Accountants' Statement of Position 93-7,
"Reporting on Advertising Costs". The primary purpose of these programs
is to elicit sales from customers who can be shown to have responded
specifically to the advertising, which, accordingly, results in
probable future economic benefits. Direct-response advertising consists
primarily of printing, postage and promotional costs and will be
amortized over the estimated period of the future benefit using the
ratio of current period revenues to total current and estimated future
period revenues. Amortization of direct response advertising costs was
$106,000 for the six months ended June 30, 1999 and is included in
promotion expenses.
4 - Goodwill
Goodwill represents cost in excess of fair value of net assets acquired
in the merger transaction, and is being amortized over 15 years. The
Company periodically re-evaluates its recoverability. In management's
opinion, there has been no impairment of goodwill at June 30, 1999.
5 - NOTE PAYABLE
The note payable of $100,000 is a demand note and requires monthly
payments of interest only, beginning May 1, 1998, at First Union
National Bank's prime rate plus 1%. Marketable securities owned by a
shareholder are collateral for the note. Interest expense was $5,281
and $4,894 for the six months ended June 30, 1999 and 1998,
respectively.
<PAGE>8
CASINO JOURNAL PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO condensed CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6 - RELATED PARTY TRANSACTIONS
The Company rents two office facilities from shareholders. One facility
is occupied pursuant to a ten-year lease which began on June 1, 1997
and requires annual rent payments of $120,000, and the other facility
is occupied pursuant to a five-year lease which began on January 1,
1996 and requires annual rent payments of $18,000. Total related party
rent expense was $69,000 and $35,403 for the six months ended june 30,
1999 and 1998, respectively.
Loans receivable, shareholders and related parties at June 30, 1999
include loans to the majority shareholder of $530,854, a loan of $3,948
to a family member of a shareholder, a loan of $184,761 to another
shareholder and loans to two shareholders totaling $12,748. The loans
bear interest at 6%.
7 - SALE OF COMMON STOCK
On January 21, 1999, options to purchase 5,000 shares of common stock
at $1.50 a share were exercised.
On February 19, 1999, options to purchase 3,000 shares of common stock
at $2.125 a share were exercised.
On June 1, 1999, options to purchase 15,000 shares of common stock at
$1.50 a share were exercised.
On June 9, 1999, options to purchase 10,000 shares of common stock at
$2.50 a share were exercised.
8 - COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income".
Comprehensive income is defined to include not only net income or loss,
but also the change in equity of a business enterprise during a period
from transactions and other events and circumstances from nonowner
sources. Total comprehensive income for the three months and six months
ended June 30, 1999, which includes the unrealized loss on investments
for the periods of $108,770 and $275,632, respectively, was $174,684
and $194,400, respectively. Total comprehensive income (loss) for the
three months and six months ended June 30, 1998, which includes the
unrealized loss on investments for the periods of $160,848, was
$152,311 and $(32,185), respectively.
<PAGE>9
Casino Journal Publishing Group, Inc.
PART I (cont.)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Trends and Uncertainties. Inasmuch as a major portion of the Company's
activities is the publishing of magazines and newsletters primarily for the
U.S. gaming industry and its consumers, the organization and sponsorship of
major trade shows and conventions for the gaming industry as well as
consumer gaming festivals for specific resorts or casinos, the publishing of
a mail order-catalog selling various gaming-related products, the
development and operation of a daily 900 number hotline information service
and providing consulting services, the Company's business operations may be
adversely affected by competitors and prolonged recessionary periods.
In addition, the future exercise of any of the outstanding Warrants is
uncertain. The lack of future exercise of the Class A or Class B Warrants
could negatively impact the Company's ability to successfully expand
operations.
Capital and Source of Liquidity. On April 3, 1998, the Company and its
combined affiliates merged with Gaming Venture Corp., U.S.A., A Nevada
corporation ("Gaming"). The Company and its combined affiliates became
wholly-owned subsidiaries of Gaming, the legal acquiror. As the Company's
and its combined affiliates' shareholders acquired approximately 65% of
Gaming's outstanding voting shares, the merger was accounted for as a
reverse acquisition of Gaming by the Company, the accounting acquiror in the
transaction.
The total cost of the acquisition was $3,726,235, consisting of the purchase
price of $3,217,468, measured by the 1,608,734 common shares retained by the
Gaming's shareholders at their fair value at the closing date of $2.00 per
share and the value of stock options ($350,000) granted to shareholders of
the Company (see Note 4 to the Audited Financial Statements) plus
transaction costs of $158,767.
The Company rents two office facilities from shareholders. One facility is
occupied pursuant to a ten year lease which began on June 1, 1997 and
requires annual rent payments of $120,000, and the other facility is
occupied pursuant to a five year lease which began on January 1, 1996 and
requires annual rent payments of $18,000. Total related party rent expense
was $69,000 and $35,403 for the six months ended June 30, 1999 and 1998,
respectively.
For the six months ended June 30, 1999, the Company had an increase in loan
receivables from shareholders and related parties of $105,401 and an increase
in loans receivable from employees of $4,225. The Company purchased $35,807
worth of equipment, and had an increase in marketable securities of
$554,940. As a result, the Company had cash flow used in investing
activities of $700,373 for the six months ended June 30, 1999.
For the six months ended June 30, 1998, the Company had an increase in
loan receivables from shareholders and related parties of $253,222 and
an decrease in loans receivable from employees of $3,322. The Company
purchased $60,877 worth of equipment, and had a decrease in marketable
securities of $39,664. As a result, the Company had cash flow used in
investing activities of $271,113 for the six months ended June 30, 1998.
For the six months ended June 30, 1999, the Company made distributions of
$65,194 to a minority interest. The Company received proceeds of $61,375
from the issuance of its common stock. As a result, the Company had net
cash used in financing activities of $3,819 for the six months ended
June 30, 1999.
For the six months ended June 30, 1998, the Company had an increase in
notes payable of $200,000. The Company made principal payments on
loan payable, automobile of $9,025. The Company received proceeds of
$200,238 from the issuance of its common stock. The Company made
distributions of $62,350 to the then sole stockholder for the six
months ended June 30, 1998. As a result, the Company had net cash
provided by financing activities of $328,863 for the six months ended
June 30, 1998.
Results of Operations. The Company had net income of $470,032 for
the six months ended June 30, 1999. The Company received revenues of
$6,756,416 that consisted of advertising revenue of $3,530,629,
subscription revenues of $1,607,357 and other revenues which consisted
primarily of consulting fees of $281,325, tradeshow revenues of
<PAGE>10
$1,186,148 and miscellaneous revenues of $150,957. The Company had
direct costs of $3,430,839 for the six months ended June 30, 1999.
Operating expenses for the six months ended June 30, 1999 were
$2,661,466 that includes payroll related costs of $1,578,580, postage
of $138,711 and other nonmaterial expenses of $680,838. Promotion
expenses were $263,337 for the six months ended June 30, 1999.
The Company had an increase in accounts receivable of $654,739.
Inventories increased $338 for the six months ended June 30, 1999 and
prepaid expenses decreased by $19,029. Deferred promotion expenses
decreased $13,931. Deferred advertising revenues decreased $31,667.
Deferred subscription revenues increased $961,671 from the sale of its
magazine and newsletter subscriptions. Deferred tradeshow revenues
decreased $312,978. The Company had depreciation and amortization of
$100,933 for the six months ended June 30, 1999. The Company had
minority interest in earnings of American Gaming Summit, LLC of
$65,194. The Company had a decrease in accounts payable and accrued
expense of $1,430 and an increase in income taxes payable of $148,000.
Other assets decreased by $3,443 for the six months ended June 30,
1999. Net cash provided by operations for the six months ended June
30, 1999 was $781,081.
The Company had net income of $128,663 for the six months ended June
30, 1998. The Company received revenues of $4,705,033 that consisted
of advertising revenue of $2,722,540, subscription revenue of $930,641
and other revenues that consisted primarily of consulting fees and
trade show revenue of $1,051,852. The Company had direct costs of
$2,182,449 for the six months ended June 30, 1998. Operating expenses
for the six months ended June 30, 1998 were $2,272,438. These
consisted principally of general payroll related costs of $1,268,432,
advertising and promotion of $179,668, postage of $131,404, travel and
entertainment of $119,248, bad debts of $91,509 and other nonmaterial
expenses of $482,177. The Company had an increase in accounts
receivable of $9,878. Inventories decreased $3,234 for the six
months ended June 30, 1998 and prepaid expenses increased by $523,887.
Deferred subscription revenue increased $182,423. The Company had
depreciation and amortization of $51,269 for the six months ended June
30, 1998. The Company had a decrease in accounts payable and accrued
expenses of $196,397 and an increase in income taxes payable of
$80,823. Other assets decreased by $17,473 for the six months ended
June 30, 1998. Net cash used in operations for the six months ended
June 30, 1998 was $266,277.
The Company is seeking to lower its operating expenses while expanding
operations and increasing its customer base and operating revenues.
The Company is focusing on decreasing administrative costs. However,
increased marketing expenses will probably occur in future periods as
the Company attempts to further increase its marketing and sales
efforts.
Impact of Year 2000. The Year 2000 issue is the result of computer
programs being written using two digits rather than four to define the
applicable year. Any of the Company's computer programs that have time-
sensitive software may recognize a date using 000 as the year 1900 rather
than the year 2000.
This could result in a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to
process transactions, send payments on invoices, or engage in similar normal
business activities.
The Company has initiated formal communications with its business venture
associates and affiliates to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues. There can be no guarantee that the
systems of other companies on which the Company's own systems may rely will
be timely converted and would not have an adverse effect on the Company's
systems.
The majority of the Company's computer systems and network are Macintosh
based The Y2K bug are not expected to affect Macintosh based systems. The
Company's MIS Director has assessed the computer systems for the Company and
determined the overall systems to be Y2K ready. The few PC computer
systems in the Company have been converted to newer computers that are
Certified Year 2000 compliant. Some individual minor issues have been
addressed and will be resolved in the middle of 1999. These issues would
not significantly affect the function of the Company in any case.
<PAGE>11
The Company believes that the Year 2000 issue will not pose significant
operational problems for its computer systems.
<PAGE>12
CASINO JOURNAL PUBLISHING GROUP, INC.
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
None
(b) Reports on Form 8-K
None
SIGNATURE
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: /s/ Alan Woinski
----------------------------
Alan Woinski,
President
August 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 1,201,029
<SECURITIES> 1,552,197
<RECEIVABLES> 1,803,591
<ALLOWANCES> 0
<INVENTORY> 33,986
<CURRENT-ASSETS> 5,222,995
<PP&E> 251,079
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,925,943
<CURRENT-LIABILITIES> 3,696,336
<BONDS> 0
<COMMON> 5,002
0
0
<OTHER-SE> 3,864,330
<TOTAL-LIABILITY-AND-EQUITY> 7,925,943
<SALES> 6,756,416
<TOTAL-REVENUES> 6,756,416
<CGS> 3,430,839
<TOTAL-COSTS> 3,430,839
<OTHER-EXPENSES> 2,661,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 683,226
<INCOME-TAX> 148,000
<INCOME-CONTINUING> 535,226
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 470,032
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
