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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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TRANS WORLD GAMING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 13-3738518
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE PENN PLAZA, NEW YORK, NEW YORK 10119
(Address of principal executive offices) (Zip Code)
(212) 563-3355
(Issuer's telephone number including area code)
Check 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 past 12
months (or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. YES X NO .
--- ---
Shares of the Registrant's Common Stock, par value $.001, outstanding as of
June 30, 1996: 2,544,286.
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TRANS WORLD GAMING CORP. ("TWG" OR THE "COMPANY") HEREBY AMENDS ITS QUARTERLY
REPORT ON FORM 10-QSB FILED WITH THE COMMISSION ON AUGUST 5, 1996 BY RESTATING
IN THEIR ENTIRETY PART I , ITEM 1 (CONDENSED CONSOLIDATED FINANCIAL STATEMENTS)
AND ITEM 2 (MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
OF OPERATIONS).
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FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED STATEMENTS
TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS June 30, Dec 31,
1996 1995
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CURRENT ASSETS (unaudited)
Cash & equivalents $392 $216
Accounts/Notes receivable 314 282
Inventories 134 43
Other current assets 77 56
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Total current assets 917 597
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PROPERTY AND EQUIPMENT -net 1,356 1,413
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OTHER ASSETS
Investment at equity 75 75
Deferred facility costs - net 10,118 10,425
Goodwill - net 658 676
Deferred income tax 283 320
Other deferred costs - net 36 40
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Total other assets 11,170 11,536
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TOTAL ASSETS $13,443 $13,546
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LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Current portion of long term debt $3,272 $3,913
Accounts payable and accrued expenses 629 334
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Total current liabilities 3,901 4,247
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LONG TERM DEBT, net of current portion 1,677 1,178
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STOCKHOLDERS EQUITY
Capital stock 3 3
Additional paid-in-capital 8,600 8,600
Stock warrants outstanding 422 0
Accumulated deficit (1,160) (482)
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Total stockholders equity 7,865 8,121
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $13,443 $13,546
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
3
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TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months ended Three months ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $3,261 $2,978 $1,594 $1,470
Costs and expenses
Cost of revenue 1,594 1,358 760 708
Administrative 1,175 534 547 269
Depreciation and Amortization 388 307 194 159
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Total costs and expenses 3,157 2,199 1,501 1,136
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Earnings/(loss) from operations 104 779 93 334
Interest expense 738 287 581 149
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Earnings/(loss) before taxes (634) 492 (488) 185
Provision for tax 44 147 22 35
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Net earnings/(loss) ($678) $345 ($510) $150
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Earnings/(loss) per share ($0.27) $0.14 ($0.20) $0.06
Common shares used in computing
earnings per share 2,544 2,544 2,544 2,544
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
4
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TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended June 30,
1996 1995
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Cash flows from operating activities $321 $230
Cash flows from investing activities (4) (378)
Cash flows from financing activities
Proceeds from short term notes 875 135
Repayment of outstanding debt (1,016) (457)
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Net cash from financing activities (141) (322)
Net increase/(decrease) in cash 176 (470)
Cash - beginning of period 216 812
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Cash - end of period $392 $342
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
5
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TRANS WORLD GAMING CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Unaudited Statements.
The accompanying consolidated financial statements for the three and six
months ended June 30, 1996 and June 30, 1995 are unaudited and reflect all
adjustments of a normal and recurring nature to present fairly, and not
misleading, the financial position and results of operation and cash flows
for the interim periods. These unaudited statements have been prepared by
the Company in accordance with generally accepted accounting principles,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Pursuant to such rules and regulations, certain financial
information and footnote disclosures normally included in such financial
statements have been condensed or omitted.
These financial statements should be read in conjunction with the financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Company's Annual Report on Form 10K-SB/A for the year ended December 31,
1995. The results of operations for the six months ended June 30, 1996 are
not necessarily indicative of the results for the entire year ending
December 31, 1996.
2. Earnings/(loss) per share were calculated based on 2,544,286 shares of
common stock outstanding for the three and six months ended June 30, 1996
and 1995 respectively.
3. In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation", which encourages companies
to recognize compensation expense in the income statement based on the fair
value of the underlying common stock at the date the awards are granted.
However, it will permit continued accounting under APB Option 25,
"Accounting for Stock Issued to Employees", accompanied by disclosure of
the pro forma effects on net income and earnings per share had the new
accounting rules been applied. The statement is effective for calendar
year 1996. The Company has not yet determined which method it will follow
for measuring compensation cost attributed to stock options or the impact
of the new standard on its consolidated financial statements.
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Item 2:MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Results of Operations
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
REVENUES. Trans World Gaming Corp.'s ("TWG") or the ("Company") revenues
for the three months ended, June 30 1996 were $1,594,000, and increase of
8% over the revenues for the three months ended June 30, 1995. Video
poker revenues for the second quarter totaled $955,000 representing a 10%
increase over second quarter revenues in the prior fiscal year. Seven
percent of the video poker revenue increase was due to the Toledo Palace
video poker parlor located in DeRidder, LA which opened on October 19,
1995. Video poker revenues from the Company's other video poker parlor,
the Gold Nugget located in Lafayette, LA, increased 4% to $896,000 in
1996 from the similar period in 1995. Revenues from fuel, food and
beverage and convenience store operations at the Woodlands Truck Plaza
located in DeRidder, LA in the second quarter of 1996 increased 6% to
$677,000 over the revenues for the second quarter 1995.
The Company believes that the revenues at the Gold Nugget will continue
to be higher than the average video poker parlor at truck stops in
Louisiana. Revenues at the Toledo Palace have increased steadily from an
average daily revenue per device of $50 in the fourth quarter 1995 to an
average of $66 during the second quarter 1996. Pending approval by the
Louisiana authorities, which approval cannot be assured, the Company has
submitted an application in July 1996 for the installation of eighteen
(18) additional devices at the Toledo Pale to be added to the video
parlor. Act 7 of the First Extraordinary Session of 1996, effective May
1, 1996, created the Louisiana Gaming Control Board (the "LGCB") with all
regulatory authority, control and jurisdiction including investigation,
licensing and enforcement pursuant to provisions of, among other things,
the Video Draw Poker Devices Control Law. Further, Act 7 provided that
all powers, duties, functions and responsibilities of, among other
things, the Video Gaming Division of State Police be transferred to the
LGCB. Act 7 also provided that the State Police, the former licenser,
may only issue certain limited licenses and renewals which created a
significant backlog of applications for additional devices and license
renewals. The Company cannot therefore, predict when, if at all, the
application will be approved. The Toledo Palace currently has fifteen
devices installed and is licensed for up to fifty.
COST OF REVENUE. Cost of Revenue as a percentage of revenues remained
virtually unchanged at 8% in the second quarter 1996 from the similar
period in 1995.
ADMINISTRATIVE. Administrative expenses in the first quarter 1996 were
$547,000 which is an increase of $278,000 over the second quarter 1995.
This increase is comprised mainly of the following expense items:
commissions of approximately of $20,000 and expenses of approximately
$230,000 in connection with the Company's recently completed financings.
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INTEREST AND OTHER INCOME. Interest expense increased by $432,000 in the
second quarter 1996 to $581,000 over the second quarter 1995. The
increase on a operating basis due to a contractual increase in the
interest due on the Chrysolith Note from 12% to 15% ($17,000) effective
July 1995, plus interest incurred in connection with the 1996 bridge
financings ($15,000). This was partially offset by a decrease in
interest expense ($23,000) on the declining principal balance of the
Prime Properties Note. In addition, the Company recognized $416,000 in
additional interest expense in connection with warrants issued as part of
the March 1996 Bridge (see: Liquidity and Capital Resources, page 9)
which interest expense was previously not reported by the Company in its
initial Quarterly Report on Form 10-QSB for the quarter ended June 30,
1996 filed August 5, 1996. This had the effect of increasing the loss
per share by an additional $(.17) per share to $(.27) per share for the
six month period ended June 30, 1996 and to $(.20) per share for the
three months ended June 30, 1996.
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Results of Operations
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
REVENUES. The Company's revenues for the six months ended June 30, 1996
were $3,261,000 which is a 10% increase over the revenues for the six
months ended June 30, 1995. Video poker revenues for the six months
ended June 30, 1996 totaled $1.945,000 representing a 9% increase over
six months revenues in the corresponding prior fiscal year. Seven
percent of this video poker revenue increase was due to the Toledo Palace
video poker parlor located in DeRidder, LA, which opened on October 19,
1995. Video poker revenues from the Company's other video poker parlor,
the Gold Nugget located in Lafayette, LA, increased 2% to $1,820,000 in
1996 over the corresponding six months of 1995. Revenues from fuel, food
and beverage and convenience store operations at the Woodlands Truck
Plaza located in DeRidder, LA for the six months ended June 30, 1996
increase 11% to $1,315,000 over the revenues for the six months of 1995.
COST OF REVENUE. Cost of Revenue as a percentage of revenues increased
to 49% in the six months of 1996 from 46% in the first six months of 1995
with approximately one-third of the increase due to costs associated with
the operation of the Toledo Palace, which opened in October 1995.
ADMINISTRATIVE. Administrative expenses for the first six months of 1996
were $1,175,000 which is an increase of $641,000 over the first six
months of 1995. This increase is comprised of the following expense
items: severance costs of $38,000 in connection with the resignation of
the Company's Chief Executive Officer in March, 1996; financing, legal
and accounting costs of approximately $175,000 in connection with an
unsuccessful effort to complete a proposed underwritten secondary
offering of securities in March 1996; consulting fees for exploring
potential acquisitions of approximately $50,000; and fees of
approximately $43,000 and expenses of approximately $230,000 in
connection with the Company's efforts to refinance the Chrysolith Note,
the Monarch Note and the Woodlands Note.
INTEREST AND OTHER INCOME. As a result of the grant of warrants to
purchase 499.925 shares of TWG common stock in connection with the Bridge
and the subsequent repayment of the Bridge loans, interest expense
increased by 157% or $451,000 in the first six months of 1996 to $738,000
compared with the first six months of 1995.
LIQUIDITY AND CAPITAL RESOURCES.
The level of cash increased by $176,000 for the six months ended June 30,
1996 due primarily to the proceeds of financings recently completed.
As of June 30, 1996, the Company's outstanding indebtedness including a
principal amount of $2,075,000 under the Chrysolith Note and $75,000
under the Monarch Note both due in its entirely on June 30, 1996.
Addition indebtedness included a note payable to Prime Properties in the
principal amount of $1,610,000 (after applying the quarterly payment of
June 22, 1996 at $292,000, with principal and interest at 10% per annum
payable quarterly through December 21, 1997,
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which was incurred in connection with the Gold Nugget transaction. With
respect to the Woodlands Plaza transaction, the Company's remaining
indebtedness is $435,000 payable on December 30,1996 with interest
payable monthly at 10% (the "Note"). Also, the balance due as of June
30, 1996 for the Bridge financings was $220,000 and trade payables
amounted to approximately $300,000.
In March, 1996 the Company retained C.P. Baker & Co., Ltd. ("Baker") for
a period of one year as placement agent to arrange bridge and convertible
debt financings. From March 25, 1996 through June 5, 1996, the Company
completed bridge financings (the "Bridge") in the form of unsecured loans
in the aggregate principal amount of $375,000, bearing interest at the
rate of 10% per annum payable at maturity. The Company agreed to repay
the principal amount in twenty weekly installments starting April 1, 1996
with the balance due at maturity. The net proceeds of the Bridge,
approximately $315,000, were used to pay the scheduled principal and
interest payment to Prime Properties of $292,000 on March 21, 1996. In
connection with the Bridge, the Company issued to the lenders warrants to
purchase 499,925 shares of the Company's common stock at an exercise
price of $.01 per share (the "Bridge Warrants"). As a result of the
Company's issuance of the Bridge Warrants and the subsequent repayment of
the Bridge Loans, the Company recognized interest expense of $416,000 in
the second quarter 1996, representing the difference between the trading
price of $.8438 or the Company's common stock at the time of the Bridge
as reported on the NASDAQ National Market System (Symbol: IBET) and the
exercise price of $.01 per share of the warrants issued in connection
with the Bridge. All these warrants carry demand registration rights
commencing in July 1996. As compensation to the placement agent, the
Company paid a cash commission of 15% of the aggregate Bridge proceeds or
$56,250.
In June 1996, the Company privately offered to selected accredited
investors a minimum of 7 units and a maximum of 12 units, each unit (the
"Unit") consisted of one $500,000 principal amount 12% secured
convertible senior bonds due June 30, 1999 (the "Bond(s)") and a warrant
to purchase 100,000 shares of common stock, par value $.001 per share of
the Company (the "Common Stock") at an exercise price of $1.00 per share
(the "Warrant(s)"). The Warrants are exercisable at any time until June
30, 2001. The Bonds are convertible at the option of the holder thereof
at a conversion price of $5.00 per share of TWG common stock. The
Company may at its option, redeem the bonds, in whole but not in part, a
100% of principal amount together with the interest accrued thereon
through the date fixed for redemption, within six months following a
public offering by the Company of common stock that raises not less than
$6,000,000 in gross proceeds. Holders of the exercise of the Warrants
are entitled to have their shares registered as part of the next
registered public offering of the common stock of the Company as
permitted under the rules of the Securities Exchange Commission. If no
public offering of common stock has occurred by
December 31, 1997, then upon written request of the holders of Warrants
issued in connection with the Bonds and exercisable for not less than
700,000 shares of common stock, the Company will be obligated to
file and use its reasonable efforts to cause to be declared effective
a registration statement or post-effective amendment as permitted
under the Securities Act of 1933. Interest on the Bonds is payable by
the Company semi-annually with the first payment due on December 15,
1996. The Company and Baker have agreed to extend the offering
through November 30, 1996. As compensation to Baker, the Company
paid a cash
10
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commission of 10% and a non-accountable expense allowance of 3% of the
gross proceedings raised in this offering.
Through October 31, 1996 the Company has issued Bonds and received gross
proceeds of $4.8 million, of which $4.0 million was closed on July 2,
1996. The net proceeds to the Company from the private placement of the
Bonds, after deducting commissions, non-accountable expenses, and
offering expenses of $120,000 were approximately $4.1 million. The
proceeds were used to retire the Chrysolith and Monarch Notes ($2.1
million), to repay the outstanding balance of the Bridge ($220,000), pay
the scheduled quarterly payments of June 21, 1996 on the Prime Note
($292,000), to retire the Woodlands Note ($435,000) to pay trade payables
($300,000) and general corporate purposes ($700,000).
The Company believes, although there can be no assurance, that existing
cash and anticipated cash flow from current operations will be sufficient
to satisfy its liquidity and capital requirements for the next twelve
months.
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Signature:
TRANS WORLD GAMING CORP.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS WORLD GAMING CORP.
-----------------------------------
Dominick J. Valenzano
Chief Financial Officer & Treasurer
November 7, 1996
12
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF EARNINGS FOUND ON PAGE
3 AND 4 OF THE COMPANY'S FORM 10QSB/A FOR THE YEAR TO DATE, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 392
<SECURITIES> 0
<RECEIVABLES> 314
<ALLOWANCES> 0
<INVENTORY> 134
<CURRENT-ASSETS> 77
<PP&E> 1562
<DEPRECIATION> 206
<TOTAL-ASSETS> 13443
<CURRENT-LIABILITIES> 3901
<BONDS> 1677
0
0
<COMMON> 3
<OTHER-SE> 7862
<TOTAL-LIABILITY-AND-EQUITY> 13443
<SALES> 1316
<TOTAL-REVENUES> 3261
<CGS> 1064
<TOTAL-COSTS> 1594
<OTHER-EXPENSES> 1563
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 738
<INCOME-PRETAX> (634)
<INCOME-TAX> 44
<INCOME-CONTINUING> (678)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (678)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
