<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 1999
/ / TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM TO .
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COMMISSION FILE NO.: 0-25244
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TRANS WORLD GAMING CORP.
(Exact name of small business issuer as specified in its charter)
NEVADA 13-3738518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PENN PLAZA, SUITE 1503 10119-0002
NEW YORK, NY (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code: (212) 563-3355
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Check whether the Issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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 / / NO /x/
Shares of the Registrant's Common Stock, par value $.001, outstanding
as of August 26, 1999: 3,364,000
Transitional Small Business Disclosure Format (check one): YES / / NO /x/
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TRANS WORLD GAMING CORP. AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1999 AND 1998
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX AND THREE 3
MONTHS ENDED JUNE 30, 1999 AND 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 5
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
ITEM 7. SIGNATURES 17
</TABLE>
<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
June 30, 1999
(in thousands, except for per share data)
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS:
<S> <C>
Cash $ 1,908
Accounts receivable, less allowance for doubtful accounts of $273 177
Prepaid expenses and other current assets 1,172
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TOTAL CURRENT ASSETS 3,257
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PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $762 4,236
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OTHER ASSETS:
Goodwill and other intangible assets, less accumulated
amortization of $3,030 11,370
Deposits and other assets 405
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11,775
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$ 19,268
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term debt $ 1,000
Accounts payable 3,401
Accrued expenses and other current liabilities 2,286
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TOTAL CURRENT LIABILITIES 6,687
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LONG-TERM LIABILITIES:
Long-term debt 17,968
Other long-term liabilities 5,147
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23,115
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 2,000 shares authorized,
none issued
Common stock $.001 par value, 50,000 shares authorized,
3,364 shares issued and outstanding 3
Additional paid-in capital 9,136
Stock warrants outstanding 5,237
Accumulated other comprehensive income 899
Accumulated deficit (25,809)
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TOTAL STOCKHOLDERS' DEFICIT (10,534)
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$ 19,268
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</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
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TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (Unaudited)
Six and Three Months Ended June 30, 1999 and 1998
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
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<S> <C> <C>
REVENUES $ 9,589 $ 6,358
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COSTS AND EXPENSES
Cost of revenues 4,498 4,845
Depreciation and amortization 1,577 920
Selling, general and administrative 3,363 979
Write-offs 75
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9,513 6,744
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INCOME (LOSS) FROM OPERATIONS 76 (386)
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OTHER INCOME (EXPENSE):
Interest expense (1,817) (1,121)
Foreign exchange gain (loss) (174)
Other (3)
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(1,994) (1,121)
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LOSS BEFORE INCOME TAXES (1,918) (1,507)
INCOME TAXES 101
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NET LOSS $ (1,918) $ (1,608)
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WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING
Basic 3,364 3,044
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LOSS PER COMMON SHARE
Basic $ (0.57) $ (0.53)
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COMPREHENSIVE LOSS
NET LOSS $ (1,918) $ (1,608)
OTHER COMPREHENSIVE INCOME, foreign currency
translation adjustment 787
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COMPREHENSIVE LOSS $ (1,131) $ (1,608)
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</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
1999 1998
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<S> <C> <C>
REVENUES $ 4,874 $ 4,789
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COSTS AND EXPENSES
Cost of revenues 2,043 3,857
Depreciation and amortization 788 802
Selling, general and administrative 1,577 769
Write-offs 75
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4,482 5,428
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INCOME (LOSS) FROM OPERATIONS 392 (639)
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OTHER INCOME (EXPENSE):
Interest expense (937) (838)
Foreign exchange gain (loss) 13
Other
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(924) (838)
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LOSS BEFORE INCOME TAXES (532) (1,477)
INCOME TAXES 101
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NET LOSS $ (532) $ (1,578)
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WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING
Basic 3,364 3,044
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LOSS PER COMMON SHARE
Basic $ (0.16) $ (0.52)
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COMPREHENSIVE LOSS
NET LOSS $ (532) $ (1,578)
OTHER COMPREHENSIVE INCOME, foreign currency
translation adjustment 265
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COMPREHENSIVE LOSS $ (268) $ (1,578)
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</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Six Months Ended June 30,
1999 and 1998
(in thousands, except for per share data)
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 895 $ (370)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of 21st Century Resorts and Casino de Zaragoza (12,754)
Property and equipment purchases and deposits (699) (642)
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NET CASH USED IN INVESTING ACTIVITIES (699) (13,396)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 1,250
Payments of short-term debt (56)
Proceeds from long-term debt 17,525
Payments of long-term debt (1,441)
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (56) 17,334
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (187)
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NET INCREASE (DECREASE) IN CASH (47) 3,568
CASH
Beginning of period 1,955 198
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End of period $ 1,908 $ 3,766
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</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
1. Unaudited Statements.
The accompanying condensed consolidated financial statements of Trans
World Gaming Corp. (the "Company" or "TWG") as of June 30, 1999 and for
the six and three months ended June 30, 1999 and 1998 are unaudited and
reflect all adjustments of a normal and recurring nature to present
fairly the financial position, results of operation and cash flows for
the interim periods. These unaudited condensed, consolidated financial
statements have been prepared by the Company pursuant to the
instructions to Form10-QSB. Pursuant to such instructions, certain
financial information and footnote disclosures normally included in
such financial statements have been condensed or omitted.
These unaudited condensed, consolidated financial statements should be
read in conjunction with the audited, consolidated financial statements
and notes thereto, together with management's discussion and analysis
of financial condition and plan of operations, contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1998. The results of operations for the six and three months ended June
30, 1999 are not necessarily indicative of the results for the entire
year ending December 31, 1999.
2. Basic earnings or (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per common share
incorporates the dilutive effect of common stock equivalents on an
average basis during the period. The Company's common stock equivalents
currently include stock options and warrants. Dilutive earnings or
(loss) per common share has not been presented for the six and three
month periods ended June 30, 1999 and 1998 since the inclusion of
common stock equivalents would have been antidilutive.
3. Segment information listed below reflects the two principal business
units of the Company during the three and six month periods ended June
30, 1999. Each segment is managed according to the products or services
that are provided to the respective customers and information is
reported on the basis of reporting to the Company's chief operating
decision maker.
<TABLE>
<CAPTION>
GAMING TRUCKSTOP OTHER CONSOLIDATED
----------- ------------ --------- ----------------
Three Months Ended
June 30 1999
<S> <C> <C> <C> <C>
Revenues $ 3,106 $ 1,469 $ 299 $ 4,874
Interest expense 744 144 49 937
Depreciation and amortization 694 70 24 788
Six Months Ended
June 30 1999
Revenues $ 6,141 $ 2,946 $ 502 $ 9,589
Interest expense 1,433 288 96 1,817
Depreciation and amortization 1,391 139 47 1,577
</TABLE>
4
<PAGE>
4. During the six and three months ended June 30, 1999, the Company
operated principally in three geographic areas: the United States, the
Czech Republic and Spain. The following table presents information
about the Company by geographic area. There were no material amounts of
sales or transfers among geographic areas.
<TABLE>
<CAPTION>
UNITED CZECH
STATES REPUBLIC SPAIN OTHER CONSOLIDATED
------ -------- ----- ----- ------------
Three Months Ended June 30, 1999
--------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $1,493 $ 2,172 $1,185 $ 24 $ 4,874
Six Months Ended June 30, 1999
------------------------------
Revenues $2,971 $ 4,338 $2,255 $ 25 $ 9,589
Long-lived Assets 3 10,109 5,100 394 15,606
</TABLE>
5. At the close of a special legislative session on April 19, 1996, a
local option bill was passed which required the residents of each
parish in the state of Louisiana to vote on the future of gambling in
their parish. On November 5, 1996, the residents in Lafayette and
Beauregard parishes in Louisiana, where the Company had video poker
operations, were among 35 Louisiana parishes that voted to eliminate
video poker (the "Voter Mandate"). As a result, the Company ceased its
video poker operations on July 1, 1999 in both of those parishes. These
were the only two facilities at which the Company had U.S. operations.
The Company, through its Chrysolith affiliate, has joined with two
video poker operators in Louisiana in challenging the vote in the
courts. On January 30, 1998, the Louisiana Supreme Court unanimously
denied without comment a writ application filed by Chrysolith, among
others, alleging Election Code violations, effectively ending the
Election Code challenge to the Voter Mandate. In May 1999, the 1st
District Court in Baton Rouge decided that the 1996 election was
illegal and the Voter Mandate should be overturned. In June 1999, the
Louisiana Court of Appeals reversed the 1st District Court's decision.
The State Supreme Court refused to hear the case and upheld the
decision of the appellate court. The U.S. Supreme Court has set an
October 1999 date to consider the issue. The Company cannot, as of the
date hereof, predict the outcome of this litigation or when a decision
relating hereto will be rendered.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
The Company's revenues totaled $4.874 million for the three months ended June
30, 1999, compared to $4.789 million for the same period in 1998, an increase of
$85,000.
Total operating results showed a loss of $532,000 for the three months ended
June 30, 1999, an improvement of $1.046 million from the previous year's loss of
$1.578 million. The Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA") improved by $1.131 million from the three months ended
June 30, 1998, totaling $1.193 million or 24.5% as percentage of total revenue
for the three months ended June 30, 1999, compared to 1.3% of total revenues for
the three months ended June 30, 1998.
On March 31,1998, the Company acquired 21st Century Resorts a.s. ("Resorts"), a
Czech Republic joint stock company which operates two casinos in the Czech
Republic and has leased a third in Znojmo, Czech Republic, which is expected to
open during the first quarter of 2000. Revenues from Resorts increased by
$187,000 to $2.172 million for the three months ended June 30, 1999 compared to
the three month period in 1998.
5
<PAGE>
On April 17, 1998, the Company acquired Casino de Zaragoza, S.A. ("Casino de
Zaragoza" or "CDZ"), a company incorporated in Zaragoza, Spain that holds an
exclusive gaming license in the Region of Aragon. Revenues from CDZ were $1.185
million for the three months ended June 30, 1999 compared to $1.2 million for
the three months ended June 30, 1998.
Costs of revenue and expenses decreased from $3.857 million for the three months
ended June 30, 1998 to $2.043 million for the three months ended June 30, 1999,
representing an improvement of $1,814 million mostly due to streamlining of CDZ
operations and the government of Aragon's agreement to defer the commencement of
certain tax payments.
Selling, general and administrative expenses increased by $808,000 for the three
months ended June 30, 1999 when compared to the same quarter last year. The cost
of marketing has increased in an attempt to increase attendance and drop at both
casinos. Finally, the cost of surveillance in compliance with the new regulatory
requirements has been significant.
Interest expense increased by $99,000 to $937,000 for the three months ended
June 30, 1999.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
The Company's revenues totaled $9.589 million for the six months ended June 30,
1999, compared to $6.358 million for the same period in 1998, an increase of
$3.231 million or 50.8%, mostly due to new business acquisitions in the second
quarter of 1998. Revenues generated by the Company's international operations
were $6.618 million for the six months ended June 30, 1999 and revenues from
Louisiana were $2.971 million. For the six months ended June 30, 1998, revenues
from international operations were $3.2 million and revenue from Louisiana was
$2.0 million.
Revenues from Resorts for the six months ended June 30, 1999 totaled $4.338
million, an increase of $2.353 million when compared to the same six month
period last year. Most of the revenue increase occurred during the first quarter
of 1999.
Total operating results showed a net loss of $1.918 million for the six months
ended June 30, 1999, representing a $327,000 increase from the net loss of
$1.591 million for the six months ended June 30, 1998. However, the Company's
EBITDA improved by $1.043 million from the six months ended June 30, 1998,
totaling $1.476 million for the six months ended June 30, 1999.
Revenues from CDZ for the six months ended June 30, 1999 were $2.225 million an
increase of $1 million when compared to the same period last year. Most of the
increase occurred during the first quarter of 1999. Despite the acquisitions of
Resorts and CDZ, the Company's cost of revenue decreased from $4.845 million for
the six months ended June 30, 1998 to $4.498 million for the six months ended
June 30, 1999, an improvement of $347,000. Reduced operating costs stemmed from
the decreased costs associated with the Company's truck stop operations in
Louisiana due primarily to a decrease in costs associated with the Company's
fuel sales, as well as improvements in CDZ operations.
Selling, general and administrative expenses increased by $2.384 million when
compared to the same period last year. Most of the increase was the direct
result of increase in professional fees due to addition of new international
business units in the second quarter of last year.
Interest expense increased by $696,000 to $1.817 million for the six months
ended June 30, 1999. This increase is attributed primarily to the $17 million of
debt incurred in the March 1998 private placement.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital, defined as current assets minus current
liabilities, improved by $179,000 from the first quarter of this year, to a
deficit of $3.430 at June 30, 1999. The Company's working capital deficit was
$3.279 million at December 31, 1998.
The Company believes, although there can be no assurance, that existing cash and
anticipated cash flows from current operations will be sufficient to satisfy its
on-going operations for the next twelve months. However, the Company will
require additional debt and/or equity financing in order to consummate certain
planned expansion and acquisitions as described under "Plan of Operations,"
below.
PLAN OF OPERATIONS
On April 1, 1998, the Company issued a press release announcing the acquisition
of Resorts. In connection with the announcement, TWG stated that a third casino
in Znojmo, Czech Republic, is planned to open during the first quarter of 2000
assuming that all required permissions and approvals are received. The Company
will require financing of approximately $1.8 to $2.0 million to equip the Znojmo
facility. The Company believes, although there can be no assurance, that
financing should be available to the Company.
On April 17, 1998, the Company issued a press release announcing the acquisition
of 90% of the Casino de Zaragoza. TWG acquired 90% of the outstanding stock of
CDZ for approximately $780,000. At the time of the acquisition, CDZ had
outstanding debt totaling approximately $4.8 million. The Company anticipates
that permission will be granted by the appropriate Spanish government
authorities that will enable TWG to move to a more favorable location. If the
Company decides to recapitalize CDZ, lease, build and equip a facility in a new
location, it is anticipated that it may require financing of approximately $4.0
million.
In the event that financing is not available for the casino in Znojmo, the
recapitalization of CDZ and the build-out of the new casino in Zaragoza, it
would have a material adverse effect on the future profitability of TWG.
TWG management will continue to develop marketing and operational strategies
designed to increase attendance and revenues at its existing locations in the
Czech Republic and Spain. The Company has acquired land near the German border
near Ceska Kubice, at Folmava, Czech Republic, and is planning to build a casino
to replace its existing facility in Ceska Kubice. Management believes that the
new location would be more accessible to its main target market in Germany and
will result in improved attendance and play. TWG also plans to transfer excess
slot machines from Ceska Kubice and Rozvadov to its new location in Znojmo,
thereby minimizing investment. Pre-opening advertisements are planned for both
Znojmo and CDZ and gala grand openings are scheduled for each location.
In November 1996, residents in 35 parishes in Louisiana, including the two
parishes in which the Company's video poker parlors were located, voted to
discontinue video poker effective June 30, 1999. The Company ceased its
operations in Louisiana effective July 1, 1999 and is currently involved in
litigation to overturn the Voter Mandate. See Part II, Item 1 - "Legal
Proceedings." No assurances can be given that such litigation will be
successful.
Management of the Company continues to seek other opportunities both within and
outside of the United States. There can be no assurance that management will be
successful in identifying such opportunities, financing such acquisitions or
investments or implementing such transactions. The failure to so do may have a
material adverse effect upon the Company's financial condition, and results of
operations or cash flows.
YEAR 2000 CONVERSION
The Company does not believe that the Year 2000 conversion as it relates to
computer applications that perform data intensive calculations beyond December
31, 1999 will have a material adverse effect on the Company's operations.
The Company uses non-customized, "off-the-shelf" accounting software programs,
subscribes to a payroll processing service and maintains banking relationships
with a major banking institution, all of which have indicated that the Year 2000
conversion issue as it relates to the Company has been resolved or that they are
Year 2000 compliant with minor adjustments in process. The Company's contingency
plan is to acquire new accounting software, change payroll service
7
<PAGE>
companies and change banking institutions in advance of the Year 2000 if the
current suppliers do not demonstrate Y2K compliance by November 1, 1999.
NOTE ON FORWARD-LOOKING INFORMATION
This Form 10-QSB contains certain forward-looking statements. For this purpose,
any statements contained in this Form 10-QSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipates,"
"estimates," or "continue" or comparable terminology or the negative thereof are
intended to identify certain forward-looking statements. These statements by
their nature involve substantial risks and uncertainties, both known and
unknown, and actual results may differ materially from any future results
expressed or implied by such forward-looking statements. The Company undertakes
no obligation to publicly update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about November 6, 1997, the Company was sued for breach of contract by
Monarch Casinos, Inc. of Louisiana and Michael A. Edwards in the 15th Judicial
District Court, Lafayette Parish, Louisiana, Case No. 97-5037B. Mr. Edwards
claimed compensation charges of approximately $2.2 million and punitive charges
of $11.1 million and alleged that the Company breached a management contract
dated September 21, 1994. The lawsuit was settled for a cash payment of $100,000
on May 15, 1999. The final order of dismissal with full prejudice which
terminated the litigation and disposed of all claims in the lawsuit was issued
by the United States District Court of Louisiana on May 24, 1999.
On January 25, 1997 (prior to the Company's acquisition of 90% of CDZ), the
directors of CDZ filed an application in Court of First Instance number 11 of
Zaragoza to declare CDZ in temporary receivership. Temporary receivership was
granted on June 23, 1997. On April 17, 1998 Aragon internal revenue service
("DGA") (the date of the Company's acquisition of 90% of CDZ), CDZ signed a
composition with creditors, most notably the Aragon internal revenue service
("DGA"), the Spanish Social Security Authorities and the City Council of
Alfajarin ("Spanish Taxing Authorities"), which set the terms of payment to
the Spanish Taxing Authorities and other creditors for debts existing as of
January 25, 1997. The composition with the Spanish Taxing Authorities and
other creditors resulted in a debt reduction of approximately $1.7 million.
This reduction was accounted for as a reduction of goodwill.
In addition, in 1998, DGA granted the Company a deferral of approximately $1.0
million in taxes on all of 1997 and some of 1998 gaming winnings. Furthermore,
in April 1998, the Company reached an understanding with the Spanish Social
Security Authorities to defer approximately $1.4 million related to all debts
generated in 1997 and the first quarter of 1998.
On May 22, 1998, the Company negotiated settlements (the
"Settlement") by and among its subsidiary Trans World Gaming of Louisiana,
Inc. ("TWGLa"), Chrysolith LLC, a joint venture 49% owned by the Company,
Prime Properties, Inc. ("Prime"), the owner and operator of the truckstop
which housed the Company's Gold Coin video poker parlor and National Auto
Truckstops, Inc.("National"). The terms of the Settlement were as follows:
(i) TWGLa and the former owners of Prime agreed that TWGLa would make a final
settlement payment to said former owners of $450,000, subject to certain
deductions, noted below, (the "Settlement Payment"), (ii) the claim of
National against Prime would be satisfied by: (a) liquidating the assets of
Prime, (b) paying to National the funds previously placed in the registry of
the court (Petition for Concursus file number 976174-D), and (c) paying to
National available cash in Prime relating to the sale of Prime's truckstop
inventory to National (the "Prime Assets") and (d) delivering a promissory
note from Prime (guaranteed by TWGLa and TWG) in the principal amount of
$239,597 bearing interest at the rate of 10% per annum payable in four equal
monthly installments beginning on June 22, 1998 (the "National Promissory
Note"); (iii) to the extent that the Prime Assets proved insufficient to
satisfy the National claim, TWGLa would reduce the Settlement Payment by the
amount of such deficiency and remit such amount to National; (iv) the
remaining funds of the Settlement Payment first were used to pay trade
creditors and to reimburse TWGLa for payments made under the National
Promissory Note and any funds remaining after such payments and
reimbursements were paid to the former owners of Prime; (v) all of the
litigation among the parties was dismissed; and (vi) all parties agreed to
mutually acceptable releases of all claims and liabilities against the
others. As of the date of this report, approximately $415,000 of the $450,000
has been paid by the Company to the former owners of Prime. Payment terms for
the remaining liabilities are currently being negotiated between the
creditors and the prior owners of Prime. It is expected that final payments
will occur before December 31, 1999.
The Company currently is involved as a plaintiff, through its Chrysolith
affiliate, in litigation challenging the Louisiana Voter Mandate. (See Part I,
Item 1 of the Form 10KSB for December 31, 1998 - "Description of Business
Regulations and Licensing - Louisiana Gaming Reform").
The Company is not currently involved in any other material legal proceeding nor
was it involved in any other material litigation during the six months ended
June 30, 1999.
9
<PAGE>
ITEM 2. CHANGES IN SECURITIES
(a) - (d) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has, from time to time, been in technical default of certain
amended indentures issued in connection with the Resorts acquisition (the
"Amended Indentures"). The Company has relied upon the forbearance and
waivers from a majority in interest of the holders of the senior notes issued
pursuant to such Amended Indentures. Value Partners, Ltd., a Texas limited
partnership ("Value Partners"), represents a majority in interest of the
holders of the senior notes. The Company has borrowed other amounts from
Value Partners from time to time (some of which have been in technical
default for which forbearance or waivers have been granted) and may seek to
borrow additional funds, or obtain equity investments, from Value Partners in
the future.
During the six and three months ended June 30, 1999, the Company was in
technical default of, and had not timely paid a $1.0 million loan from Value
Partners, which was due on September 15, 1998 (the "Value Partners Loan"). The
Company is currently negotiating an extension of the Value Partners Loan. On
July 30, 1999, the Company received a waiver of such default and a waiver of the
cross defaults from Value Partners. The waivers cover actions or omissions by
the Company which may constitute a default or an event of default under the debt
instruments through and including January 1, 2000 (except for payment defaults
under certain debt instruments). Value Partners also granted an extension of the
Value Partners Loan until January 1, 2000 with the understanding that the
Company and Value Partners will work in good faith to renegotiate the loan terms
prior to August 31, 1999. A default by the Company on this loan (or any loan)
would result in a default on all of the Company's debt instruments and would
have a material adverse effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-QSB
a. Exhibits
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.2 Articles of Incorporation Incorporated by reference to Exhibit 3.1
contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
4.1 By-laws Incorporated by reference to Exhibit 3.2
contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
4.2 Specimen Common Stock Certificate Incorporated by reference to Exhibit 4.1
contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
4.3 Specimen Redeemable Common Stock Purchase Incorporated by reference to Exhibit 4.2
Warrant contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
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</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
<S> <C> <C>
4.4 Form of Warrant Agreement Incorporated by reference to Exhibit 4.3
contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
4.5 Confidential Private Placement Memorandum Incorporated by reference to Exhibit 4.4
dated June 17, 1996 contained in Form 10-KSB for the fiscal
year ended December 31, 1996. (File No.
0-25244)
4.6 Supplement No. 1 dated January 14, 1997 to Incorporated by reference to Exhibit 4.5
Confidential Private Placement Memorandum contained in Form 10-KSB for the fiscal
dated June 17, 1996 year ended December 31, 1996. (File No.
0-25244)
4.7 Indenture dated as of November 1, 1996 Incorporated by reference to Exhibit 4.6
between the Company and Trans World Gaming contained in Form 10-KSB for the fiscal
of Louisiana, Inc., as Issuer, and U.S. year ended December 31, 1996. (File No.
Trust Company of Texas, N.A., as Trustee 0-25244)
4.8 Form of 12% Secured Convertible Senior Bond Incorporated by reference to Exhibit 4.7
due June 30, 1999 contained in Form 10-KSB for the fiscal
year ended December 31, 1996. (File No.
0-25244)
4.9 Form of Warrant to Purchase Common Stock Incorporated by reference to Exhibit 4.8
Dated July 1, 1996 contained in Form 10-KSB for the fiscal
year ended December 31, 1996. (File No.
0-25244)
4.10 Form of Warrant for Purchase of Shares of Incorporated by reference to Exhibit 4.9
Common Stock dated January 1, 1997 contained in Form 10-KSB for the fiscal
year ended December 31, 1996. (File No.
0-25244)
4.11 Form of Non-Negotiable Promissory Note Incorporated by reference to Exhibit 4.10
dated January 1, 1997 contained in Form 10-KSB for the fiscal
year ended December 31, 1996. (File No.
0-25244)
4.12 First Amended Senior Secured Promissory Incorporated by reference to Exhibit 4.11
Note dated December 19, 1997 contained in Form 10-KSB for the fiscal
year ended December 31, 1997 filed on
March 30, 1998. (File No. 0-25244)
4.13 Form of Warrant for Purchase of Shares of Incorporated by reference to Exhibit 4.12
Common Stock dated January 15, 1998 contained in Form 10-KSB for the fiscal
year ended December 31, 1997 filed on
March 30, 1998. (File No. 0-25244)
4.14 Lenders Waiver and Option Agreement dated Incorporated by reference to Exhibit 4.13
March 9, 1998 contained in Form 10-KSB for the fiscal
year ended December 31, 1997 filed on
March 30, 1998. (File No. 0-25244)
4.15 Indenture dated March 31, 1998 among the Incorporated by reference to Exhibit 4(I)
Company, TWG International U.S. contained in the Form 8-K filed on April
Corporation, TWG Finance Corp. and U.S. 14, 1998 (File No. 0-25244)
Trust Company of Texas, N.A.
4.16 Series C Warrant to Purchase Common Stock Incorporated by reference to Exhibit 4(II)
dated March 31, 1998 contained in the Form 8-K filed on April
14, 1998 (File No. 0-25244)
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</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
<S> <C> <C>
4.17 Indenture dated March 31, 1998 between TWG Incorporated by reference to Exhibit
International U.S. Corporation and U.S. 4(III) contained in the Form 8-K filed on
Trust Company of Texas, N.A. April 14, 1998 (File No. 0-25244)
4.18 Consent to Amend Indenture, Bonds and Incorporated by reference to Exhibit 4(IV)
Warrants dated March 25, 1998 by and contained in the Form 8-K filed on April
between the Company, Trans World Gaming of 14, 1998 (File No. 0-25244)
Louisiana, Inc., U.S. Trust Company of
Texas, N.A., and certain individuals
4.19 First Amended Indenture dated March 31, Incorporated by reference to Exhibit 4(V)
1998 among the Company, TWGLa and U.S. contained in the Form 8-K filed on April
Trust Company of Texas, N.A. 14, 1998 (File No. 0-25244)
4.20 Series A Warrant to Purchase Common Stock Incorporated by reference to Exhibit 4(VI)
dated March 31, 1998 contained in the Form 8-K filed on April
14, 1998 (File No. 0-25244)
4.21 Series B Warrant to Purchase Common Stock Incorporated by reference to Exhibit
dated March 31, 1998 4(VII) contained in the Form 8-K filed on
April 14, 1998 (File No. 0-25244)
4.22 Agreement to Amend Warrants dated March 31, Incorporated by reference to Exhibit
1998 the among Company and the named Holders 4(VIII) contained in the Form 8-K filed on
April 14, 1998 (File No. 0-25244)
4.23 Series D Warrant to Purchase Common Stock Incorporated by reference to Exhibit 4(IX)
dated March 31, 1998 contained in the Form 8-K filed on April
14, 1998 (File No. 0-25244)
10.1 Lender's Waiver dated July 30, 1999 Incorporated by reference to Exhibit 4.23
in the Form 10-QSB filed August 20, 1999
(File No. 0-25244)
10.2 Agreement for Exchange of Shares dated July Incorporated by reference to Exhibit 10.1
12, 1994,between the Company and the contained in the registration statement on
shareholders of Lee Young Enterprises, Inc. Form SB-2 (File No. 33-85446-A).
10.3 Asset Purchase Agreement dated as of Incorporated by reference to Exhibit 10.2
September 21,1994, between the Company and contained in the registration statement on
Prime Properties, Inc. Form SB-2 (File No. 33-85446-A).
10.4 Agreement of Sale dated as of September 21, Incorporated by reference to Exhibit 10.3
1994,between the Company and Prime contained in the registration statement on
Properties, Inc. Form SB-2 (File No. 33-85446-A).
10.5 Form of Lease between Prime Properties, Incorporated by reference to Exhibit 10.4
Inc. and the Company. contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
10.6 Agreement dated September 21, 1994, among Incorporated by reference to Exhibit 10.5
Chrysolith, LLC, Prime Properties, Inc., contained in the registration statement on
Monarch Casinos, Inc. of Louisiana, Form SB-2 (File No. 33-85446-A).
("Monarch") and the Company.
10.7 Asset Purchase Agreement dated September Incorporated by reference to Exhibit 10.6
21, 1994, between Chrysolith L.L.C. and contained in the registration statement on
Monarch Form SB-2 (File No. 33-85446-A).
10.8 Lease (with option) dated May 10, 1994 Incorporated by reference to Exhibit 10.7
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
<S> <C> <C>
among Lula Miller, Inc., Charles A. Jones contained in the registration statement on
III and Kelly McCoy Jones, as Lessor, and Form SB-2 (File No. 33-85446-A).
Monarch, as Lessee.
10.9 Offer to Purchase dated October 4, 1994, Incorporated by reference to Exhibit 10.8
among Trans World Gaming of Louisiana, contained in the registration statement on
Inc., Monarch, Lula Miller, Inc., Charles Form SB-2 (File No. 33-85446-A).
A. Jones III and Kelly McCoy Jones.
10.10 Memorandum of Agreement dated March 18, Incorporated by reference to Exhibit 10.9
1994, between the Company and Yves Gouhier contained in the registration statement on
and Camille Costard to acquire shares of Form SB-2 (File No. 33-85446-A).
Casino Cherbourg S.A., as amended (English
translation, except amendment is in French.)
10.11 Shareholder Agreement dated April 7, 1994, Incorporated by reference to Exhibit 10.10
between the Company and Michael A. Edwards, contained in the registration statement on
as the shareholders of Monarch Form SB-2 (File No. 33-85446-A).
10.12 Employment Agreement dated March 6, 1996 Incorporated by reference to Exhibit 10.11
between the Company and Stanley Kohlenberg contained in the Form 10-KSB for the
fiscal year ended December 31, 1995 (File
No. 0-25244).
10.13 Employment Agreement between the Company Incorporated by reference to Exhibit 10.12
and Dominick J. Valenzano contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
10.14 1993 Incentive Stock Option Plan Incorporated by reference to Exhibit 10.13
contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
10.15 Form of 41/2% Bridge Note Incorporated by reference to Exhibit 10.14
contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
10.16 Form of 10% Secured Bridge Incorporated by reference to Exhibit 10.15
contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
10.17 Collateral Mortgage relating to the Incorporated by reference to Exhibit 10.16
Woodlands Travel Plaza. contained in the registration statement on
Form SB-2 (File No. 33-85446-A).
10.18 Operating Agreement dated as of December Incorporated by reference to Exhibit 10.17
22, 1994 Gold Coin. contained between the Company and
Chrysolith relating to the in the Form
10-KSB for the fiscal year ended December
31, 1994 (File No. 0-25244).
10.19 Note in principal amount $75,000 payable by Incorporated by reference to Exhibit 10.18
Monarch (and assumed by the Company). contained in the Form 10-KSB for the
fiscal year ended December 31, 1994 (File
No. 0-25244).
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</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
<S> <C> <C>
10.20 Lease Agreement dated May 1, 1993 between Incorporated by reference to Exhibit 10.19
National Auto/Truck Stops, Inc. and Prime contained in the Form 10-KSB for the
Properties with respect to the 76 Plaza fiscal year ended December 31, 1995 (File
No. 0-25244).
10.21 Agreement and General Release dated as of Incorporated by reference to Exhibit 10.20
March 6, 1996 between the Company and R. K. contained in the Form 10-KSB for the
Merkey. fiscal year ended December 31, 1995 (File
No. 0-25244).
10.22 Forbearance Agreement dated January 19, Incorporated by reference to Exhibit 10.21
1996 between the Company and Chrysolith contained in the Form 10-KSB for the
fiscal year ended December 31, 1995 (File
No. 0-25244).
10.23 Letter Agreement dated January 30, 1996 Incorporated by reference to Exhibit 10.22
between the Company and Chrysolith contained in the Form 10-KSB for the
regarding forbearance payments fiscal year ended December 31, 1995 (File
No. 0-25244).
10.24 Consulting Agreement dated January 1, 1997 Incorporated by reference to Exhibit 10.23
between the Company and Stanley Kohlenberg contains in Form 10-KSB for the fiscal
year ended December 31, 1996 (File No.
0-25244).
10.25 Employment Agreement dated December 26, Incorporated by reference to Exhibit 10.24
1996 between the Company and Andrew contains in Form 10-KSB for the fiscal
Tottenham year ended December 31, 1996 (File No.
0-25244).
10.26 Employment Agreement date February 1, 1997 Incorporated by reference to Exhibit 10.25
between the Company and Christopher Moore contains in Form 10-KSB for the fiscal
year ended December 31, 1996 (File No.
0-25244).
10.27 Cancellation Agreement dated as of October Incorporated by reference to Exhibit 10.26
3, 1996 between the Company and Mid-City contained in the Form 10-KSB for the
Associates fiscal year ended December 31, 1996 (File
No. 0-25244).
10.28 Agreement of Lease dated as of October 2, Incorporated by reference to Exhibit 10.27
1996 between the Company and Mid-City contained in the Form 10-KSB for the
Associates fiscal year ended December 31, 1996 (File
No. 0-25244).
10.29 Stock Purchase Agreement dated as of Incorporated by reference to Exhibit 10.28
January 1, 1997 among the Company, Andrew contained in the Form 10-KSB for the
Tottenham and Robin Tottenham fiscal year ended December 31, 1996 (File
No. 0-25244
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
<S> <C> <C>
10.30 Employment Agreement dated April 15, 1997 Incorporated by reference to Exhibit 10.29
between Company and James Hardman contained in Form 10-KSB for the fiscal
year ended December 31, 1997 filed on
March 30, 1998. (File No. 0-25244)
10.31 Stock Purchase Agreement dated as of Incorporated by reference to Exhibit 10.30
January 20, 1998 between the Company and contained in Form 10-KSB for the fiscal
21st Century Resorts year ended December 31, 1997 filed on
March 31, 1998. (File No. 0-25244)
10.32 Form of the Subscription Agreement for the Incorporated by reference to Exhibit 10.31
Private Placement contained in Form 10-KSB for the fiscal
year ended December 31, 1997 filed on
March 31, 1998. (File No. 0-5244)
10.33 Escrow Agreement dated March 17, 1998 among Incorporated by reference to Exhibit 10.32
the Company, TWG Finance Corp., TWG contained in Form 10-KSB for the fiscal
International U.S. Corporation as Issuer year ended December 31, 1997 filed on
and U.S. Trust Company of Texas, N.A., as March 30, 1998. (File No. 0-25244)
Trustee
10.34 Consulting Agreement between Chrysolith, Incorporated by reference to Exhibit 10
L.L.C. and Lee Young dated January 1, 1997 contained in the Form 10-QSB for the
quarter ended June 30, 1996 filed on
August 14, 1996 (File No. 0-25244)
10.35 Purchase Agreement dated as of April 15, Incorporated by reference to Exhibit 10.34
1997 among the Company, James R. Hardman, contained in the Form 10-Q for the quarter
Jr. and Multiple Application Tracking System ended March 31, 1997, filed on May 9, 1997
(File No. 0-25244)
10.36 License Agreement dated as of April 15, Incorporated by reference to Exhibit 10.35
1997 between the Company and James R. contained in the Form 10-Q for the quarter
Hardman, Jr. ended March 31, 1997, filed on May 9, 1997
(File No. 0-25244)
10.37 Loan Agreement dated June 11, 1997 between Incorporated by reference to Exhibit 10.36
the Company and Value Partners contained in the Form 8-K filed on June
17, 1997 (File No. 0-25244)
10.38 $350,000 Senior Promissory Note dated June Incorporated by reference to Exhibit 10.37
11, 1997 contained in the Form 8-K filed on June
17, 1997 (File No. 0-25244)
10.39 Joint Activity Agreement dated March 31, Incorporated by reference to Exhibit 10.38
1997 between Mr. Mahmud Avdiyev and contained in the Form 8-K filed on June
Tottenham & Co., d/b/a ART marketing Ltd. 17, 1997 (File No. 0-25244)
10.40 Loan Agreement dated October 27, 1997, Incorporated by reference to Exhibit 10.39
between Value Partners, and the Company contained in the Form 10-QSB for the
quarter ended September 30, 1997, filed on
November 12, 1997 (File No. 0-25244)
10.41 $262,500 Senior Promissory Note dated Incorporated by reference to Exhibit 10.40
October 27, 1997 contained in the Form 10-QSB for the
quarter ended September 30, 1997, filed on
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
<S> <C> <C>
November 12, 1997 (File No. 0-25244)
10.42 Warrant to Purchase Common Stock dated Incorporated by reference to Exhibit 10.41
November 27, 1997 contained in the Form 10-QSB for the
quarter ended September 30, 1997, filed on
November 12, 1997 (File No. 0-25244)
10.43 Employment Agreement between the Company Incorporated by reference to Exhibit 10.42
and Rami S. Ramadan dated July 12, 1999 contained in the Form 8-K filed on July
13, 1999 (File No. 0-25244)
10.44 Severance Agreement between the Company and Incorporated by reference to Exhibit 10.43
Stanley Kohlenberg dated May 23, 1999 contained in the Form 8-K filed on July
13, 1999 (File No. 0-25244)
10.45 Severance Agreement among the Company, Incorporated by reference to Exhibit 10.44
Trans World Gaming of Louisiana, TWG contained in the Form 8-K filed on July
International U.S. Corporation and TWG 13, 1999 (File No. 0-25244)
Finance Corp. and Dominick J. Valenzano
dated July 12, 1999
10.46 Form of Lease Agreement between London Incorporated by reference to Exhibit 10.46
Investments s.r.o. and the Company contained in the Form 10-KSB filed on
August 3, 1999 (File No. 0-25244).
27.1 Financial Data Schedule Filed herewith
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
b. Reports on Form 8-K
During the quarter ended June 30, 1999, the Company
filed several Periodic Reports and Amendments thereto on Form
8-K, as described below.
On April 9, 1999, the Company filed a Form 8-K (the
"April 8-K") to explain further delays encountered by the
Company in relation to its failure to timely meet reporting
requirements, as originally set forth in a Form 12b-25 filed
by the Company on March 29, 1999. The April 8-K was further
amended and updated by two Forms 8-K/A filed on May 18, 1999
and June 18, 1999, respectively.
On May 18, 1999, the Company filed a Form 8-K to
report the receipt by the Board of Directors of a resignation
letter from Geoffrey B. Baker dated May 13, 1999. Mr. Baker
resigned as a director for personal reasons.
16
<PAGE>
ITEM 7. SIGNATURES
In accordance with the requirements of Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS WORLD GAMING CORP.
Date: August 26, 1999 By: /s/ Rami S. Ramadan
-------------------
Chief Executive Officer
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOUND ON PAGE F-3 AND F-4
OF THE COMPANY'S 10KSB/A FOR THE YEAR ENDED DECEMBER 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,908
<SECURITIES> 0
<RECEIVABLES> 177
<ALLOWANCES> 0
<INVENTORY> 30
<CURRENT-ASSETS> 3,257
<PP&E> 4,997
<DEPRECIATION> 762
<TOTAL-ASSETS> 19,268
<CURRENT-LIABILITIES> 6,688
<BONDS> 23,115
0
0
<COMMON> 3
<OTHER-SE> (10,537)
<TOTAL-LIABILITY-AND-EQUITY> 19,268
<SALES> 0
<TOTAL-REVENUES> 9,589
<CGS> 0
<TOTAL-COSTS> 9,513
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,817
<INCOME-PRETAX> (1,744)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,744)
<DISCONTINUED> 0
<EXTRAORDINARY> 174
<CHANGES> 0
<NET-INCOME> (1,918)
<EPS-BASIC> (0.57)
<EPS-DILUTED> (0.57)
</TABLE>
